An increasing number of SME Food Producers are opting to seek alternative finance to support a rising demand for high quality artisan products.
Research produced from the recent Companies House filings of almost 600 food manufacturers indicates that borrowing hit a record high of £1.72 billion in 2015, as more food producers utilise the opportunity to invest in additional equipment and high quality ingredients in order to stay competitive.
Increased investment is needed to meet new demand for ‘artisanal’ products
This recent rise in borrowing may also be driven in part by the rising demand among consumers for natural and ‘artisanal’ foods, which tend to require higher cost ingredients, new factory fit-outs and other investment needed to support production methods.
Peter Alderson, Managing Director of LDF, says, “Interest in hand-crafted products has soared. Consumers are now placing more value on quality and originality - meaning more expensive and locally or regionally sourced ingredients are needed. New IT equipment is also often required to improve traceability and investment has amplified significantly as a result.”
Supermarkets are also starting to see the benefits of this shift in demand, and over the last few years they in turn have increased pressure on producers to lower prices, often imposing longer payment terms. As a result, some SME producers have found themselves needing to seek a finance solution to cover costs and fund plans for growth.
Finance can help avoid late payments
“Late payment issues need not cause a major problem for businesses, by adopting effective financial and cash flow management, including the use of finance, can help to alleviate much of the pressure and prevent temporary strain from impacting on long-term growth.” Peter comments.
Late and delayed payment has posed a real issue for SMEs over the last few years. In 2011, the EU implemented the Late Payment Directive, aiming to tackle the problem. Last year, the UK government laid out plans to appoint a Small Business Commissioner, whose remit will include addressing payment issues - the bill that will see the Commissioner appointed is currently going through parliament.
Peter adds, “Reviewing how resources and investment is managed on a company-wide basis is recommended.”
Asset Finance and unsecured Business Loans are suitable options that can help with the increasing demands for late payments and increased productivity.