Transforming business strategy and direction with alternative financing

By Craig Fletcher, MD, Fortis Engineering 

Many SMEs will be looking to 2022 and hoping for a brighter cash flow future as they continue to recover from Covid-19. Of course, cash flow issues have been around since long before the pandemic, but the rapid spread of the Omicron variant proves that nobody knows what’s around the corner, or how best to prepare for it. One thing we do know is that financial planning for the year ahead has never been more important.  

Manufacturing is one of the many industries whose financials were particularly hard-hit by Covid-19, with the decline in sales, lengthy payment terms, and late payments culminating in major cash flow issues.  We felt this firsthand in 2020, as a mid-sized manufacturing business in the North West, the first year of the pandemic left us in pressing need of a solution for bridging income periods and levelling out cash flows. We had previous experience running a business that was forced to fold following poor financing experiences, and were determined to operate without relying on external funding. Whilst this was possible, we soon found that our growth was stunted.  

Competing for larger business deals required longer payment terms, and outgoings for materials and overheads often outweighed the pace of money coming in. Although retained customers were reliable, the financial gaps from lengthy payment terms were something that we couldn’t afford.  

Our accountant came to us with a new fintech solution; financing tech that was breaking new ground in the invoice factoring market. Our previous attempts with invoice financing had been detrimental, with one supplier refusing to pay out on certain invoices and complicated terms that tied us into lengthy contracts. So we were unsurprisingly hesitant at this new offering, but AREX Markets uses data and technology in a way we have never seen before. We were intrigued by their flexible contract terms that don’t tie businesses into lengthy agreements, their ability to unlock trapped cash from single or multiple invoices, and that they don’t charge a sizable percentage of the invoice back to the business.  

Fast forward to several months later and the business hasn’t looked back – we are pitching for work with much larger business partners and competing for contracts far greater than ever before. Shortly after signing up to AREX, we won two new contracts worth well over £400k – a considerable chunk of business for us, particularly in the context of a pandemic. Long payment terms that would have led to complicated negotiations or loss of business were no longer an issue now we had flexible cash flow options, and we were able to sustain this upwards trajectory whilst getting money back in the bank within 24 hours. 

Unlocking new business and growth opportunities weren’t the only benefits of signing up to AREX. We are now able to look ahead to the future and plan further into the future with our finances. Instead of focusing on smaller, short-term projects, we can pitch for long standing retainers running for years instead of months. Having these retained contracts allowed for more accurate forecasting now that money was no longer tied up in unpaid invoices, which has ultimately led to the business doubling its turnover in a year that most were happy to breakeven.  

This year will no doubt bring more uncertainty to businesses in the UK and beyond, and whilst we can’t predict what the next instalment of the pandemic will have in store, we can and should utilise every option at our disposal. We were looking for a solution to help us grow sustainably and accessed help through AREX within a matter of hours. Fortis has learned firsthand that it really does pay to take a more proactive approach to managing our finances through new-age alternative finance.