In this guest article, Mark O’Connor, a specialist in financing for the glass industry, shares six key points that will help you secure the best funding to achieve your business aspirations.
There are certain types of process improvement, machinery and software that can transform the profitability and growth potential of a glass business. If you have ambitious plans but only have cash reserves to cover part of them, then finance can provide the solution.
Many people think of business finance only for plant and equipment. But software, which can transform the efficiency and productivity of a glass business, can also be financed, so you avoid up-front license costs and instead make a monthly payment to include support and upgrades.
Focusing on the ROI
Before you make any major purchases for your business, it pays to consider all the options for achieving cost savings and improving sales. This means you prioritise the investments that will give the greatest and soonest payback.
It may seem obvious to invest in faster and more energy-efficient machinery if its purchase price is justified by its lower power consumption and extra capacity. However, software can be particularly effective in identifying inefficiencies and waste, and making productivity improvements that enable greater throughput with the same machinery and staffing. Software for the glass industry has advanced greatly in recent years, giving you levels of insight, control and process optimisation that were not previously seen.
It is also possible to buy this kind of specialist software with finance, so that licenses, support and upgrades are all covered. With a solid business plan, the monthly costs are quickly outweighed by the ongoing savings.
Keeping your cash for the right things
You may well have enough cash to buy a new piece of equipment or invest in software to increase your throughput and serve customers better. But there may also be related expenditure as you prepare your factory for the new machinery or change processes and layouts. And chances are, you will also need to invest in more marketing and sales activity to bring in those extra orders.
Some things are far easier and more cost-effective to finance than others, so to ensure you have cash for intangible investments, like marketing and process improvements, consider using finance instead of cash when you are buying high value assets such as plant and equipment.
Optimising your business for investment
If your finances have been managed for tax efficiency and to deliver good dividends, your business may not look as strong on paper as it is in reality. To get the best finance deals, your accounts need to show the kind of ratios that reflect not only healthy income but also good reserves.
This may take some time to achieve, so it pays to think and plan ahead. Alternatively, if you know you can demonstrate outstanding industry expertise, customer insight and vision, a good finance specialist may persuade underwriters to look beyond the figures and consider your business on its own merits.
Considering the need for security
No matter how strong your business, lenders need to consider the worst case scenario and how they could recover their money if needed. If you are financing equipment which has inherent value, then this in itself may be enough to secure the investment.
However, you should also think carefully about how confident you are in the future of your business and how much of the risk you are personally willing to take, in order to achieve those greater returns. The more risk you are prepared to share, the more favourable the rates that lenders will be willing to offer.
Selecting the right products for your business
There are numerous different financial products within the three areas of loans, leases and hire purchase. Each has its own characteristics and there are business situations where some are much better suited than others.
It is important that you select the right product or combination of products to meet your needs. Lending rates are important but remember that releasing capital into your business at the right moment can save substantial management time and unlock far greater returns.
Glass businesses face many challenges, from recruiting and retaining skilled staff, to coping with soaring energy costs and keeping up with ever more efficient and responsive competitors.
Fortunately, the days are gone when finance companies were only interested in physical assets. Provided you can build a strong case and demonstrate strong return on investment, you can access finance for many different business improvements.
For example, many of Jotika’s customers now choose to lease our glass software. These arrangements often cover additional modules or major upgrades, so they can improve efficiency, reduce waste and cut costs, without using up the capital they need for other business opportunities.
If you’d like to discuss questions about business finance with Mark or explore how Jotika software could transform your glass business, please get in touch.