The North West has a habit of producing businesses that outgrow their cash. A Trafford Park engineer wins a contract it can’t tool up for. A Stockport food producer lands a supermarket listing and finds the retailer pays on 60 days. A Preston haulier needs two more trucks before the new depot opens.
These are good problems, but they’re still problems, and the way most owners solve them is to ring the bank they’ve always used and take whatever is offered.
That works until it doesn’t. Here’s what I’d want every owner in the region to think about first.
One lender is a single point of failure
If all of your borrowing sits with one bank, that bank’s appetite becomes your growth plan. Banks change their minds about sectors, about regions and about individual customers, and they rarely tell you in advance. I’ve seen a profitable Manchester firm lose an overdraft at renewal for reasons that had nothing to do with its own trading.
Spreading facilities across two or three lenders, each matched to a different job, is cheaper insurance than it sounds. The vehicles sit on asset finance with one lender. The debtor book supports invoice finance with another. A term loan for the fit out sits with a third. If one of them pulls back, the business keeps moving.
Match the money to the job
The commonest mistake I see is borrowing a lump sum over five years to cover a problem that lasts 60 days. The reverse is just as costly, which is paying for a long term asset out of short term cash.
A worked example. A Bolton packaging firm needs a new machine quoted at £65,000, plus £20,000 of stock to serve a new customer who pays on 45 days, plus around £10,000 of extra wages while the new line settles in. The machine suits asset finance over five years, secured on the machine itself. The stock and wages are a gap that closes every time the customer pays, which is what a revolving facility or invoice finance is designed for. The owner’s first instinct was a single £95,000 loan. Splitting it cut the monthly outgoings and left the term loan capacity free for the next project.
Regional and government backed money is real, with limits
The British Business Bank runs the Northern Powerhouse Investment Fund II, which covers the North West through appointed fund managers and offers smaller loans and debt finance to growing businesses in the region alongside equity. It’s worth a look, with the caveat that each fund has its own criteria and process, and the timescales are not the same as a commercial lender’s.
The Growth Guarantee Scheme, also run by the British Business Bank, gives participating lenders a government backed guarantee on part of a facility, which helps them support businesses they’d otherwise decline. The guarantee protects the lender, not the borrower, and you remain liable for the full amount. The rules and the closing date are on the British Business Bank website and they change, so check before you build a plan around it.
What lenders ask about North West businesses
The questions are the same whether you’re in Carlisle or Crewe. What is the money for, how does it come back, and what happens if the customer pays late? Lenders will want your last filed accounts, six months of bank statements and a cash flow forecast that shows the gap you’re funding and when it closes. Evidence of the new work, a signed contract or a purchase order, does more for an application than any amount of narrative.
If your bank has said no, say so and say why. A decline from one lender is information, not a verdict. Many lenders outside the high street are comfortable with young businesses, seasonal trades, and owners with an old blemish on their record, and some of the best of them actively prefer the North West because the sector mix is so broad.
Count the cost of borrowing before you price the job
Interest is only part of it. Arrangement fees, early repayment terms and whether the rate is fixed all matter, and most unsecured lenders will ask directors for a personal guarantee. Build the cost of funding into the price of the contract the way you build in materials and wages. A job that looks profitable can turn marginal once you account for funding the 60 days between starting work and getting paid.
Broker fees depend on the lender and the deal, and you shouldn’t be asked for anything upfront. We’re a whole of market broker based in Chester, we arrange funding rather than lend it ourselves, and most of our North West clients come to us after one lender has already said no. Our page on business loans in the North West sets out the main options and how to prepare.
Growth is easier to fund than most owners expect. The trick is to decide what the money is for before you decide where it comes from, and never to let one lender hold the whole plan.
About the author
Simon Palmer (pictured) is Director of Smart Funding Solutions, a whole of market commercial finance broker based in Chester that arranges funding for businesses across the North West and the rest of the UK.
