Category: Manufacturing Business

Finance Options

Typical Finance Types, uses and descriptions

1. Farm Finance, Rural Finance

An all embracing term we use to describe all types of farm and agricultural finance we offer in the rural and country business sectors and which can also be described as Agricultural Finance, Equestrian Finance, Farm Finance, Land Finance and Horticultural Finance. Finance can be provided for holiday complexes, caravan parks, caravan sites, properties with agricultural restrictions, land, buildings, working farms, non-working farms, nurseries, garden centres, smallholdings, estates, fisheries, farm shops and generally all types of rural type situations.

2. Agricultural Loan, Loan for Agriculture, Loans for Agriculture

More commonly described as an Agricultural Mortgage, Mortgage for Agriculture, Agricultural Re-mortgage or Re-mortgage for Agriculture being a loan secured by a first charge over property in UK, England. In some cases a loan may be secured by way of a second charge over this type of property.

3. Bridging Loan, Bridging Finance

This is a short-term arrangement whereby a loan is secured either by way of a first charge or second charge on property in England, Wales, Scotland or Northern Ireland. Usually, but not always, interest is rolled up or added to the account so that all the money is repaid by the end of the term, meaning that no monthly payments are made.

Maintenance tips to prolong your tractor’s lifespan

Your tractor is likely to be one of your business’ most expensive assets, so it’s important to take the time to care for it to extend the lifespan of your investment.

These quick and simple tractor maintenance tasks can help to keep your tractor running costs down and prevent damage to prolong your tractor’s lifespan.

Regular inspections

One of the most important things you can do to look after your tractor is take the time to inspect its condition regularly. This will help you to spot any signs of wear or damage early on and take steps to repair it and prevent further damage. Check your tractor’s manufacturer’s manual for advice on how frequently it requires servicing and specific maintenance tasks to be carried out.

Store in a dry place

When your tractor is not in use it should always be stored in a dry place where it is protected from the elements. Being exposed to moisture for prolonged periods can cause your tractor’s parts to rust and corrode, causing damage and shortening its lifespan.

Clean the air filter

Your tractor stirs up a lot of dirt and dust as it is working, so it’s important to keep any eye on its air filters and clean them regularly. Blocked air filters can cause a build up of debris to gather on your tractor’s internal components, causing them to fail and shortening your tractor’s lifespan.

Top up the oil and coolant

Your tractor requires coolant to prevent it from overheating and oil to lubricate its moving parts. Without either of these liquids you could find yourself faced with expensive damage to your tractor’s engine. Create a maintenance schedule to help you to remember to check the levels of these important fluids regularly and top them up when necessary.

Check the tyre pressure

Without the right level of tyre pressure your tractor could end up working harder than it needs to. Check what the correct tyre pressure is in the manufacturer’s manual and get into the habit of checking the pressure regularly to keep your tractor operating efficiently and protect it from damage.

If you require help or advice with financing a new tractor, speak to our team here at Richmond Asset Finance. We provide a range of flexible agricultural finance services to help you to grow your business. To discuss your requirements in more detail, give our team a call on 0113 288 3277.

Farmers – Are You Exploiting This Tax Allowance?

It may not be all good news for farmers this year but there is one particular piece of news that every farmer should be aware of and that relates to an opportunity to take advantage of machine purchases with the help of the government.

Farm machinery is often a major purchase with tractors alone costing in excess of £100,000 so if these savings can be offset it has to be good news. Fortunately, the government stepped in to help farmers with a change to the Annual Investment Allowance that will go a long way towards helping farm businesses make some big investments in farm machinery.

The fact that the move isn’t permanent should alert farmers to take advantage before 2021. The AIA threshold was £200,000 in 2018 and this has temporarily risen to £1million for the next 2 years.

With a lot of uncertainty at present and for the future of some farms in the UK this allowance could make a difference. Specialist finance could help ease costs further for farm businesses and enable more investment to improve efficiency and explore new opportunities for farm business development in the future.

If you would like to find out more about farm finance contact one of our advisors today who will be able to help.

How to value your manufacturing business

Putting a price tag on a manufacturer is a rather complicated business. Hi-tech machinery, strong supply contacts, and a diversified risk profile can all add millions to a market cap.

Manufacturing output in the UK surged upwards by nearly 2% in June according to the Office for National Statistics. This is the strongest monthly increase since the end of 2010. This is important – changes in manufacturing output are often a useful barometer for economic growth for the UK as a whole. Given the improvement in manufacturing prospects, owners of manufacturing companies should be thinking about the impact on the value of their businesses.

A key consideration for value is the volume and value of supply contracts. Manufacturing output is driven by contracts to supply. Very few manufacturers produce on a speculative basis, preferring to produce volumes on the basis of orders. If the associated revenues of a manufacturer are not secure, in that there are few contracts in place, or the product itself has a limited or uncertain future, then it is likely that an investor will demand a higher return on any capital invested in return for a shorter business life.

Providing certainty over future revenue generation is positive for valuations. One way that investors will assess the predictability of revenue is by analysing the terms of the existing contracts, looking particularly at size, length and the contractual renewal terms of contracts. Historical, together with current performance may also provide a useful guide when considering the likelihood of renewing contracts, customer churn and the ability to secure new custom.

Clearly, manufacturing businesses with greater certainty over cash flows and long term contracts will be valued more favourably than those that lack this certainty.

‘Concentration risk’ is also a key valuation consideration for prospective buyers. Certain manufacturers, such as apparel manufacturers supplying large retailers, may have it as a condition of their contract that they are exclusive suppliers and, therefore, are not able to supply anyone else in order for them to guarantee supply lines. While contracts may be lucrative and the association with the likes of M&S or Next provide profile, losing a contract would jeopardise the business. Such a risk could weigh heavily in the mind of a prospective investor. This is a particular issue for manufacturing businesses making generic products which could be easily produced by another supplier, and in a cheap labour economy.

As with many other industries, customer relationships may also have an influence on the value of a manufacturing business. A solid relationship with key buyers within large retailers can positively impact value because of the possibilities for future contract wins and the implied stability of existing arrangements.

Investors will also analyse the other major contracts of the manufacturing business, such as operational leases. For example, the business may have a long term lease over its manufacturing premises representing a significant overhead. If there are high costs present within a business alongside uncertain or poor revenue prospects investors will steer well clear.

As one would expect within a manufacturing business, property, plant and equipment usually represent some of the largest items on the balance sheet. Aside from property, these assets typically include all machinery used in the manufacturing process as well as storage, transporting equipment and other assets.

As such, when assessing the value of a manufacturing business overall, plant and machinery is often a major consideration, in particular the maintenance and replacement costs. For example, an investor will need to assess whether and for how long the plant and machinery will suit the business’s needs and strategy. If the underpinning technology of the plant and machinery is dated or soon-to-be obsolete an investor will have to consider the amount of capital expenditure required to keep the business competitive and revise the value downwards.

Understanding the asset base is a key consideration for any prospective investor (who ultimately is the person who determines values.) The intangible assets such as contract values and customer relationship, provides a good indication of a business’s prospects and assessment of existing plant and machinery will provide a useful basis for considering future capital expenditure requirements.