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Rescuing SME from Intensive Care

Topic : Rescuing SME from Intensive Care
Author : Shaun Leahy - Alpha Enterprises

Issue:
Company X had made losses for 2 years, who were up against their overdraft limit and also utilised fully their factoring limit It was under scrutiny by their bank whose services were put on a 6 month notice.

In early 2012, Company X’s bank undertook a review of its £100k factoring limit, its £100k overdraft and its trading record. The factoring manager put the company on warning that it would continue banking services for only 6 months, by when another review would be undertaken. Company X had a £1.0m turnover and the bank suggested a part time finance director be engaged.

After engaging Shaun, they had a successful meeting with their bank manager which not only continued their funding, but extended facilities by 30%. The company is still trading and is now operating profitably.

Resolution:

After a thorough review of the company’s goals, he:

  • made changes to their accounting processes;
  • gave an analysis of the company income streams and of its cost structure
  • advised on operational decisions to turnaround losses into profits
  • introduced a cash planning and forecasting model with daily reviews
  • reviewed fully the ledgers of debtors and creditors to help find Company X’s longer-term partners.

After some hard decisions, the company’s profits improved.

Impact:

When the next bank review approached, Company X’s Managing Director was briefed and prepared reports to answer all of the bank’s potential queries. When the bank manager arrived, she spent over 2 hours reviewing and questioning the business and operational reports, the business cashflow and the forecasts. She was impressed not just with the quality of the ready information for an SME, but also by the change of priorities of the business and of its new found confidence and attitudes in decision making.

Before leaving, the bank manager reinstated its factoring facilities without a notice period, plus offered a proposal to extend Company X’s factoring facility by either 30% or 50%.

 

Author and Financeheads Member
Shaun Leahy Alpha Enterprises
0777 197 6665 e-mail: sleahy@alphaenterprises.co.uk


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