Securing the Right Funding for your Business

David Allenson
Relationship Manager, Durham and Tees Valley
•Different forms of Finance

•How to get your Bank onside

•Credit Crunch- Cause and Effects

Background:
Working Capital
• Stock»Debtors»Cash
• Overdraft
• Factoring/ Confidential Invoice Discounting
• Selective Invoice Financing
• Letters of Credit
 Fixed Assets

•Plant/ Equipment/ Vehicles

•Term Loans
•Asset Finance
•Small Firms Loan Guarantee Scheme
•EIB Loan Scheme
Premises

•Commercial Mortgages
How to get your Bank onside

• Experienced Management Team/ Good Track Record

• Financial Information
• Quality Forecasts/ Businessplan/ Rationale
• Evidence of Support From Advisors
• Security maybe important but Cash is King!!
• Keep your promises
Credit Crunch

Causes and Effects

 Credit Crunch
What Does it Mean to You?

• Less Availability of Credit?

• Price of Borrowing Goes up

• Good time to have deposits

Since the “Credit Crunch” started in August last year market interest rates have
become significantly more volatile…

7.0%

6.5%

6.0%

5.5%

5.0%
3 year GBP swap rate
Historic 3 month sterling LIBOR
BoE Base Rate
4.5%
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep-
07 07 07 07 07 07 07 07 07 07 07 07 08 08 08 08 08 08 08 08 08

Source: Barclays Capital, Reuters, September 2008

Base Rate expectations remain focused on the
downside… Historical Bank of England Base Rate and Forecasts
View for End Q3 2009

6.50 No Change (5.00%)

6.00

5.50
One Rate Cut (4.75%)
5.00

4.50

4.00 Two Rate Cuts (4.50%)

3.50
Reuters Poll Low
3.00 Reuters Poll High
Mean
2.50
2001 2002 2003 2004 2005 2006 2007 2008 2009
Three Rate Cuts (4.25%)
The views of some poll contributors are in the figure to the right. Source: Reuters, 18 September 2008

…and the range of views remains wide

 The MPC decided to hold Base Rate at 5.00% at its September meeting, as had been widely Four Rate Cuts (4.00%)
expected. The poll consensus is that the MPC has shifted to a more dovish stance with an
average rate prediction of 4.12% in 12 months time.
 Out of the 64 economists polled see the rates go down to 4.75% by the end of this year.
 The MPC is mandated to keep inflation close to two percent but data released earlier in
September showed it reached 4.7% in August.
 The survey of around 70 economists all taken on Sept 17, a day after the Fed swung an $85bn
lifeline at troubled global insurer AIG and soon after the collapse of investment bank Lehman
Brothers, showed the BoE rates go down to 4% by the end of 2009. Five Rate Cuts (3.75%)
 The Office for National Statistics revised their growth figure for Q2 08 from 0.2% y/y to 0.0%
y/y. The central bank also forecasted UK economic growth at 0.1% y/y in Q2 2009 in the
MPC’s August Inflation Report.
Six Rate Cuts (3.50%)
Key Message

• Not ‘ one size fits all’

• Every Business is Unique
• Solutions need to be tailored
• The experience of your Bank/ Relationship Manager is
key