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How Do Manufacturers in the U.K. Get Financing for Their Orders?

Managing public finance and stimulating growth becomes a high-wire balancing act in the U.K., but the government, loan industry, and private investors understand that a healthy manufacturing economy keeps British national security strong and its citizens happy. The manufacturing industry provides exports and investments that lead to stronger employment, improvements in infrastructure, and a better competitive position against leading manufacturing countries such as the United States, Germany, Japan, and China.

The Top 10 Industries in the U.K.

Industry in the U.K. has strong European ties, but globalisation plays an increasingly major role in the success of manufacturing and marketing. Businesses cannot afford to wait for European economies to sort themselves out but must look to their own financial security. Industry has evolved from the manufacture of traditional hard goods and agricultural products to electronics and information technology, which drive future growth.

Some of the top industries in the U.K. include the following domestic products.

  1. Financial services make one of the strongest segments of the British economy, and London, along with New York City, ranks as the world's largest financial centre.
  2. Organic chemistry products make up one of the country's strongest exports.
  3. The biotechnology and pharmaceutical industries enjoy solid financial health.
  4. The U.K. has many natural resources that promote manufacturing such as coal, petroleum, iron ore, salt, gypsum, silica, lead, limestone, tin, and natural gas. These resources contribute to the success of the thriving aeronautical industry.
  5. Automotive manufacturing adds billions of pounds to the local and export economies.
  6. Engine manufacturing for passenger and commercial vehicles makes up a strong part of the British economy.
  7. The fishing industry, although declining, continues to make a vital contribution to domestic security.
  8. Nanotechnologies and information technologies promise to play more significant roles in the immediate future.
  9. Electronics and optics offer vibrant areas for manufacturing investments to strengthen British economic health.
  10. The U.K. has plenty of arable land, and agricultural products continue to play major roles in promoting financial health and increasing national security.

The Development of Sophisticated Products Requires Financing

Various funding options offer business owners ways to finance growth that creates jobs, increases exports, and strengthens the domestic economy. The Olympics certainly gave the country an economic boost, but these benefits expand when the money goes to strengthen growth in the country's manufacturing base. Businesses can bridge their funding gaps with many traditional and nontraditional financing schemes.

Businesses that grow rapidly need financial help to compete by enabling the purchase of new machinery, moving to larger quarters, training new employees, and buying raw materials. Types of business finance for manufacturers include the following options.

Invoice Financing or Factoring

Companies can free their assets for expansion by selling their accounts receivable to investors and loan companies. Companies can raise up to 90 percent of money owed to them within a day or two. Business can grow without taking on expensive debts or overtrading.

Purchase Order Financing

Purchase order financing offers a variation on conventional factoring or invoice financing that offers many benefits to manufacturing industries. Businesses can gain funding to buy basic raw materials before they get to the invoicing stage. Verification and inspection protocols tend to be more strict for this type of financing, but the benefits for strapped businesses make the effort worthwhile. Government purchase orders, major manufacturer POs, and international POs have legal force, and competitive lending rates help British manufacturers expand their influence in global markets.

Wage Financing

Wage financing offers another alternative to factoring. This method concentrates on employee wages including PAYE contributions. Wage financing works well for industries that rely heavily on people skills such as software development.

Asset Financing

Asset financing offers many possible options for securing funding. Business owners can expand by using their equipment as collateral for traditional loans. Collateral could be machinery, office equipment, furnishings, and business property.

  • Some business owners might choose to mortgage their buildings or other personal property to get long-term loans and lower interest rates.
  • Business loans include traditional instalment agreements and preapproved credit limits.
  • In some cases, owners can use personal or business credit cards for small loans to take advantage of opportunities that have time limits.
  • Commercial mortgages usually make the best option for major expansions into new manufacturing lines or the acquisitions of larger commercial quarters.
  • Some companies choose to offer shares of their companies to venture capitalists in exchange for the money they need to expand. Companies do not need to repay these loans, but angel investors will own shares of the company. This form of financing works well for companies that have major expansion plans but lack the capital to put them into effect.

Manufacturing Grants

Government-sponsored grants offer the means for business expansion without requiring any cash repayments. Although many incentives for business tend to favour tax relief, the government also offers cash grants to encourage development of vital industries. A Regional Development Agency administers grant programs in each region, and this financing option could give local businesses the resources they need for success.

Business Loan Guarantees

Strong business ideas for new products often fail to meet lenders' strict criteria for loans. The Enterprise Finance Guarantee helps entrepreneurs get financing by guaranteeing 75 percent of loans ranging from £1,000 to £1 million.

Other Financing Options

Of course, companies still have the regular options of applying for personal loans, borrowing money from friends and family members, changing their business structures to offer shares on the exchanges, or trying nontraditional approaches such as offering apprenticeship programs in partnership with the government.

In the U.K., infrastructure improvements help generate economic activity at all levels. Benefits include better access to export markets, greater mobility for workforces, and creating better environments that attract investment capital. However, direct investing in the manufacturing industries offer sustainable economic benefits that could fuel growth for decades. British industry needs to concentrate more on lucrative sectors such as electronics, IT development, medical technologies, and biomedical products.

The U.K. economy benefits from North Shore oil production, a strong pharmaceutical industry, and the growing aerospace industry. Expanding the base to include nanotechnologies, optics, electronics and IT software will give the country the economic strength it needs to meet the challenges of globalisation. The economy of United Kingdom ranks as the seventh largest in the world and third largest in Europe. The U.K. economy includes the gross domestic products of England, Scotland, Wales and Northern Ireland. Pressures from an industrialised China, the move to intangible IT technologies, and global expansion of marketing demand that business owners make investments in new ideas and research to stay competitive.