Invoice discounting and factoring are two of the measures north-west firms could take to keep liquidity in their cashflow, in light of the fact that the region’s companies are slower than any other’s at paying their invoices.

Figures from Experian show it took an average of 35.54 days longer than agreed for north-west companies to pay what they owed in the fourth quarter of 2011.

Over the full year, the delay was even longer at 36.75 days after the stated payment deadline had elapsed.

This is roughly ten days longer than the national average, which stood at 25.97 days in the fourth quarter.

Jason Mills, head of payment performance at Experian UK & Ireland, says: “Payment performance is the timeliest indicator of the current health of any business.”

Factoring and invoice discounting are two important tools of finance for businesses whose debtors are paying more slowly than usual.

They allow for 85% of the value of your current invoices to be paid in advance as an injection of capital, underwritten on the quality of your debtors rather than on your own credit rating.

Once the invoices are settled, you receive the remaining amount, with the appropriate charges deducted.

Significant changes to finance for business use could arise in April 2012, following changes to the Annual Investment Allowance (AIA), part of the Capital Allowances Act 2001.

As part of the Finance Bill 2011, the total cap on the AIA for businesses per financial year is being lowered from £100,000 to just £25,000.

That means any additional finance for business assets or machinery spent in the same year will not qualify for tax relief in the same way.

Companies within the charge to corporation tax face this change on April 1st 2012, while those within the charge to income tax – including limited liability partnerships and unincorporated businesses – see their allowance fall on April 6th.

So what can you do to make the most of your AIA in the last months of the 2011-12 financial year?

The obvious answer is to arrange finance for business investments in time for the April deadlines.

If you can get everything in place to make your purchase before the cut-off point, you can count it towards your 2011-12 AIA.

With turbulent economic conditions keeping business investments down over the past 12 months, you may realise you have more of your 2011-12 allowance remaining than you will have at your disposal for the whole of 2012-13.

Contact an advisor to learn more about how your company’s tax exposure could be affected, and to learn more about how to bring forward your remaining investments to maximise your real-terms AIA.

Factoring – an injection of cash based on outstanding invoices – could help companies with their cashflow during periods of market instability.

According to business analyst Gartner, market volatility and risk management are two of the four challenges currently being faced by chief information officers.

CIOs must decide if existing risk models are enough to assess their companies’ liabilities in the current economic climate, Gartner warns.

But with risks on the scale of government defaults and instability across the eurozone, the analyst adds that detailed testing of forecasts may prove difficult.

“Can existing risk models accommodate alternatives to the lack of historical data? In many cases, as much as three years of back-data is required,” points out Gartner fellow and vice-president David Furlonger.

Factoring is one way businesses may be able to manage their debtor liabilities, by receiving an injection of capital based on amounts owed by clients.

Up to 85% of the value of current invoices can be received via factoring, with a charge deducted once the client pays the relevant invoice and the funds are retrieved.

Commercial landlords seeking loans for businesses involved in letting property may have found there were fewer options open to them in 2011.

According to a newly published report from De Montfort University and entitled ‘UK Commercial Property Lending Market’, active lenders were seeing less competition by the midpoint of the year.

However, there were signs of some lenders still being willing to offer new loans for business purposes.

Over a third (35%) of those surveyed planned to increase the size of their loan books at mid-year 2011.

More than two in five (43%) of lending teams approached by the researchers also said they intended to increase loan originations.

The research suggests that, even in a constrained market, there are pockets of activity where loans for business applications can still be found.

At ALG Finance, we started 2011 cautiously optimistic about the nation’s recovery from recession – and we are still realistic about the prospects for the months to come.

Headline figures disguise the fact that some sectors are still faring worse than others, while some are recovering much faster.

Whichever situation you find yourself in, we are still here to offer you support when you need it most.

Business loans have their own role to play in getting the UK economy back on track, according to a recent report from the Office for Budget Responsibility.

Published to coincide with Chancellor of the Exchequer George Osborne’s Autumn Statement, the OBR report stresses the importance of the availability of investment funds for non-financial companies.

“We expect the recovery to be supported primarily by growth in business investment and net trade,” the report adds.

Chris Fletcher, director of policy at Greater Manchester Chamber of Commerce, called the document “grim reading”, calling for the government to implement rapid changes in order to ease conditions for businesses.

“The devil is in the detail and, with such a comprehensive series of actions, it is important that they are complementary,” he said of the Chancellor’s announced measures.

In the meantime, however, business loans could prove to be one way for companies to access the funds they need in order to capitalise on any growth in the economy, as well as to gain a competitive advantage over others in their sector.

We are delighted to support Jim of Easylegs Automotive Ltd. He has invented pneumatic landing legs for trailers, called Easylegs and they are getting some serious attention. The whole concept is ground breaking, and the design is being warmly accepted by industry experts. His invention was presented to the Dragons in the 8th episode of Dragons’ Den, and was positively received by Hilary Devey, the Den’s haulage expert. View the short video clip to see how the Easylegs operate or for more information, go to www.easylegs.co.uk

Now that we have digested the hectic festive period, we would like to share our observations of the past year with you. Like so many other businesses, we are wondering what 2011 will have in store for us. Have we now fully emerged from the difficulties of the last two years and can we confidently look forward to the coming year? We have also gathered some interesting statistics that show where we are now and allow us to forecast for the future.

A review of 2010

For businesses all over the country, 2010 was about emerging from the difficulties of 2008 and 2009 and starting to rebuild steadily. Comparisons by a leading Business Credit Check Agency of the ‘adverse’ business statistics between the last two years highlight this improvement:

• CCJs were down 26%;
• Administration orders were down 34%;
• Winding-up petitions were down 21%;
• Liquidations were down 9%;
• Receiverships were down 35%;
• Dissolutions were down 33%.

These statistics firmly suggest the worst impact of the recession on business viability is behind us. Our own experience at ALG Finance is similar in that we’ve lost far less customers who went out of business in 2010, than in 2009. The following statistics can also be considered encouraging:

• Voluntary arrangements up 9%. Companies not failing but continuing because those involved can see the light at the end of the tunnel?
• New Incorporations up 11%. Positive news!
• Count of Trading companies was up 2% with a tiny decline in Non-trading, which is OK!

These are all key figures which support the argument that things have improved.

To the future

Experience tells us that, providing overall demand is broadly unaffected, those businesses that survive a recession have a new opportunity to grow by filling the gap left by their competitors who failed. However, there are some cautionary notes:

• The impact of the recession was not even across sectors. Some were hit harder than others.
• The economy is not out of the woods yet. Rebalancing government expenditure is only just beginning to bite. For some, the squeeze is only just starting and the VAT rise may dampen consumer demand improvement.

But, overall, our prognosis for 2011 is cautiously optimistic. What we can be sure about is that ALG Finance will be here supporting you making wise decisions and helping you get on in 2011.

It looks like we are not out of the woods yet. The recently announced government cuts are bound to impact negatively on the economy so it is vital that businesses protect themselves financially. One way to help protect your cash flow is to refinance existing plant and machinery – you can raise cash against your unencumbered assets. Read our ‘Refinance’ section for more information.

…of the Greater Manchester Chamber of Commerce. Being new members, we are delighted to be in touch with so many local businesses about asset finance and hope this will continue!