Southampton: HWB secures EFG funding for client
As Southampton accountants HWB deliver one of the first success stories under the government’s Enterprise Finance Guarantee Scheme, director Richard Hurst is reporting that one of the government measures to stimulate bank lending is just beginning to show signs of making a difference to companies in the south.
As a result, Romsey-based Merryhill Envirotec is starting the new financial year on a positive note with a £300k loan secured from The Royal Bank of Scotland (RBS) to facilitate the company’s plans for growth.
The Enterprise Finance Guarantee Scheme (EFGS) is part of a package of measures unveiled by the Chancellor in January. Designed to improve availability of working capital through term loans and consolidation of overdrafts, the government guarantees 75% of any loan against default with the remaining risk being covered by the bank. The scheme is open to businesses with turnover of up to £25m and all loans must be repaid within 10 years.
Critics of the flagship scheme cite a complicated application process but according to Richard Hurst, Merryhill’s success proves that money is now being advanced to well-run companies with strong business models.
“Scrutiny of a company’s accounts and forecasts is part and parcel of any funding application and it goes without saying that both the bank and the Department for Business, Enterprise and Regulatory Reform (BERR) need to be 100% satisfied that any business they are asked to support is well managed and can prove its viability.
“When it comes to making an application under the new scheme, there’s no doubt that producing regular management accounts assists greatly, not least because they form the basis of the projections that are required by the bank.”
In Merryhill’s case, the future looks bright. David Mulcahy, the owner of the business, has worked proactively with HWB and Geof Wilkinson, relationship manager at RBS in Southampton, to ascertain the best funding solution to allow the business to continue to grow and diversify. The resultant EFGS loan has facilitated Merryhill’s ambitious business plans.
As one of the UK’s foremost specialists in asbestos and hazardous material removal, Merryhill’s markets are closely aligned with the construction and industrial sectors. In recent years the company – which employs 45 people at its Hampshire headquarters and operational centres in Bristol and Birmingham – has undertaken significant contracts for government clients including the Ministry of Defence, UK Atomic Energy Authority and HM Prison Service. It is the only approved sole asbestos removal sub contractor appointed for asbestos removal in relation to the 2012 Olympic Park and recently became the first company in the UK to put all its operational staff through the new NVQ2 in licensed asbestos removal.
“Like many SMEs trading within the construction industry, we started to see the tightening of credit lines within this particular market during the first quarter of 2008,” explained Paul Fox, Merryhill’s director of business development. “We have always been prudent in terms of retaining a diverse client base and this enabled us to trade strongly into the summer of last year with a 25% increase on budget predictions in the last quarter and a strong order book taking us into the new year.
“We operate several levels down the procurement chain and were not as badly affected by the decline in the construction market as some other operators in our field. Nonetheless, the downturn in the housing market and increase in the number of other construction projects being put on hold started to take its toll from a cash flow perspective.
“Merryhill is a classic example of a good, strong business, which required funding in order to realise its growth potential. We worked with HWB and RBS to ascertain the best way of restructuring our finances and raising new capital to secure the broad, solid line of financing so crucial to our continued success. We made a strategic decision to make use of the new government initiative as soon as it was announced and are delighted that, four months later, we are in a position to keep developing the business, focus on the future and concentrate on securing a record further year of growth.”
Said Geof Wilkinson of RBS: “I wish David, Paul and the Merryhill team every success as the business continues to grow. It has a strong track record and the EFGS loan – together with bank funding – will enable the business to build on its robust customer base and take on new contracts. I look forward to continuing to work with the Merryhill team.”
Meanwhile, HWB reports strong interest in the scheme from existing clients and new enquirers and is progressing a number of further applications on behalf of companies with a broad spectrum of business interests.
