We often comment in our newsletters on the state of the economy and have discussed a number of times recently whether things are at last improving.
Our overall view is that the UK economy has turned the corner and growth is gradually returning, but that it is patchy and slow. The antics of politicians in both Europe and the US do little to give confidence that there are steady hands on the economic tiller.
One of the usual signs of an improving economy is an increase in companies running short of cash; additional orders require more working capital and in many cases banks are unwilling, or unable, to make further facilities available.
In recent months we have been involved with a number of companies in this situation. Typically they are good businesses, but are either early stage and have not built up reserves, or have used up reserves to survive the lean years. The good news now is that there are a number of financial products available to help companies in this position. Obviously the first route is to raise additional equity from existing or new investors and there is a ready market for this. However, we have recently come across a number of debt products which work well in the right circumstances; these include crowd funding, certain mezzanine products and a very interesting facility to finance international trade.
The conclusion to this is that traditional methods of digging companies out of a hole may not work too well, but with innovative thinking there is often a way.
Stephen Kimbell
October 2013
