Christchurch businesses are struggling with a cash
flow crisis that threatens to cripple the region’s efforts to rebuild according
to Lock Finance, which has specialised in business financing since 1889 and has
a significant number of Canterbury clients.
Lock Finance CEO
Simon Thompson, who is also a part time consultant to the World Bank, explains:
`Almost a third of our clients are based in the Canterbury region and a
significant challenge for many of them is balancing the payments that need to
go out with the timing of the work coming in. The time taken by the EQC to
approve work, together with the policies adopted by some major contractors mean
that there is sometimes a gap of six months or more between money going out on
wages, materials and running costs, and the money coming in for work
completed.’
Business Mentors New
Zealand Canterbury Coordinator Jill Taiaroa agrees that the mentoring service
is seeing cash flow related distress among SMEs in the region: `There is a
delay running through the whole system that is causing the problems. There are
so many people in the chain, from the EQC, the larger players and then a lot of
sub contractors, that there are inevitable long delays which impact on smaller
companies’ cash flow making it very difficult for them to retain staff until
the work is approved.’
Simon Thompson visits
the region at least once a month and reports that on his last trip he met one
client with a drainage contracting business who had a lot of work being
processed by EQC but was unable to use those prospects as business finance
equity and consequently was losing his best workers to projects in Queensland. Another
client has 4,000 driveways and 300 swimming pools to repair; work which will
keep his business occupied for years, but the growing gap between commission
and payment meant that the poor cashflow was threatening the viability of the
company.
Simon Thompson
comments: `It will get better as time goes on, but in the meantime some of
these companies are on a knife edge just managing to pay their staff and keep
going. Unlike some of the bankers and other financiers we do understand the
order flow and the business cycle. Traditional banks find it hard to deal with
a business without having property as security or cash in the bank. They
haven’t got the people or the expertise to properly assess a business and so a
lot of hidden value is not being recognised.
`Business owners
should realise there is a more diverse range of SME assets (such as plant,
inventory and account receivables) beyond traditional security such as
property-based assets on which to base their borrowing. New Zealand leads the way in this area and
the World Bank sees us as a ‘best practice’ country. We have a very good legal
framework (based on our Personal Property Securities Act), a well-used online
security registry system and active market lenders, such as Lock Finance, who
do not need property security when lending to the SME sector.’
Lock Finance, which
has just signed on as a National Patron of Business Mentors, sees support for
mentoring as an integral part of its vision
for the economic development of New Zealand.
Lock Finance is a
100% New Zealand owned finance company, providing financial services to small
and medium-sized businesses throughout New Zealand. Lock Finance aims to
help SMEs optimise their business growth by providing a range of fully
integrated funding options including working capital, trade finance, debtor
finance and factoring.
Further
Information:
Simon
Thompson, Lock Finance: 0274 895 559
Peter Boyes, BPR: 0275 540 500
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