Poppleton & Appleby say manufacturing suffers disproportionately

May 7, 2011 - PRLog -- The high volume of manufacturers in the region, combined with the industry’s reliance on credit and shortage of available funding from lenders, has made manufacturing a major area of concern.
Gavin Bates, senior manager at Birmingham and Coventry-based insolvency firm Poppleton and Appleby, explained that despite many manufacturers having full order books the lack of available funding is forcing many into financial difficulties.
“Many of the manufacturers we have been called in to assist are not having trouble taking orders. What they are struggling with is convincing the banks to lend money to cover their overheads,” he said.
“There is often a period of three to six months between taking an order and receiving payment, the lead time. Manufacturing companies have to finance the costs during this lead time
“The finance to cover that used to come from banks but they are less willing to lend, and that causes many to struggle, which in turn affects the credit ratings of manufacturing companies - it becomes a vicious circle.
“There have been some very recent cases where the reduction in credit rating has directly led to its insolvency”
Recent figures show that 3,657 businesses became insolvent in the first quarter of 2011 with the worst affected sectors being construction with 614 business failures closely followed by manufacturing with 452.
Bates also said the signs were that things would get worse before they got better.
“Interest rates are expected to rise – so even those lucky enough to have received credit are likely to be placed under more financial strain as their loan repayments will increase in the near future,” he added.
“Manufacturers and banks need to get back to basics to avoid problems before it is too late.
“Lenders and business owners need to sit down and understand exactly what each other need to plan for the long term now rather than in three months’ time.
“If no compromise can be reached with the banks or other lenders then business owners should seek professional advice and guidance from organisations such as ours in order to investigate possible courses of action and alternative sources of finance.”
ENDS
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