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inflation

Inflation – a Problem or an Opportunity for Business?

Banks were faced with the prospect of deflation and falling prices in 2015, which can prove problematic for consumer-facing businesses. Deflation can encourage consumers to delay purchases, in the expectation that prices will fall. This can negatively impact or serve implications for the value of firms’ stock holdings – they run the risk of holding inventories that are going down in monetary value.

However, modest inflation can encourage buyers to buy now, rather than delay and mask price changes for a brand. If inflationary pressures force all brands/companies to adjust prices, a price adjustment may go unnoticed. These are considered attractive to consumer good companies.

In contrast, a spike in price inflation is a serious concern to businesses – planning and investment decisions become harder, and it may be associated with recessionary tendencies in an economy, leading to reduced consumer spending. Some firms may hold onto their stocks for longer in anticipation that they will achieve higher prices tomorrow.

Handling Inflation

To an extent businesses can shield their customers from the effects of cost-based inflation, however, this does vary and depends on the size and branding of the company.

  • Larger companies may have resources to smooth out prices and hedge the costs of key inputs.
  • Smaller companies without a financial buffer may struggle to smooth out pricing, especially if their main input cost is scarce. For example, construction firms that rely on labour – inflationary pay increases can’t be stockpiled by the business in advance.
  • Strong brands aim to maintain a constant base price for key products. This enables brands to position themselves in comparison to their competitors – if the product price varies, consumers may receive mixed messages about the brand, especially when the price indicates quality level.

Consumer good companies can use several methods to manipulate prices without changing the “list price”.

  • The regularity of special offers and discounts is reduced.
  • Suspension of formulation and/or sizes that are less profitable.
  • Reduction of supply to channels which achieve lower margins.
  • “Shrinkflation” – some consumer good companies reduce pack sizes, rather than raise prices.

How can IntaCapital Swiss assist businesses?

At IntaCapital Swiss, we offer financial services that facilitate funding for businesses and projects across the world, including the United Kingdom. We have a range of facilities available for those seeking loan values between £2m – £100m.

With our expert team of financiers, we can offer new projects and businesses immediate working capital across a wide variety of industries, subject to an adequate business plan and passing our due diligence.

To apply, complete our online application form – one of our Client Relationship Managers will review and get in touch to discuss your application. To find out more about IntaCapital Swiss SA facilities, please see here.

How is the Government preparing to help UK businesses?

Emergency support measures introduced by the UK government during the Covid 19 pandemic are being replaced by a £3bn-a-year loan guarantee scheme, backed by UK ministers. This new scheme will come with tighter conditions for those borrowing, unlike the easily accessible finances available during Covid – which resulted in billions of pounds lost in fraud. Businesses under the scheme will be expected to offer personal guarantees for loans administrated by the banks – meaning UK businesses will be liable for defaults on repayments ahead of triggering the government guarantee.

The Policy

Under current proposals, the guarantee is likely to be set at 70% of the value of the loan and will run for at least two years. The policy builds from the existing recovery loan scheme; however, the new guarantee is unlikely to be up and running before the recovery loan programme ends in June. In contrast to the pandemic “bounce back loan” scheme, this new policy will set an annual cap of £3bn on the amount banks are able to lend through the scheme. In addition, the rates will be offered at market rates, as opposed to the fixed low-interest rates seen during the pandemic bounce-back scheme.

Lenders are expected to offer loan guarantees of up to £2m to businesses under the scheme. Normal conditions are encouraged by Treasury officials to restore the business banking market – despite fears among groups that large lenders are becoming less active in the sector.

How can IntaCapital Swiss assist UK businesses?

At IntaCapital Swiss, we offer financial services that facilitate funding for businesses and projects across the United Kingdom. We have a range of facilities available for those seeking loan values between £2m – £100m.

With our expert team of financiers, we can offer new projects and businesses immediate working capital across a wide variety of industries, subject to an adequate business plan and passing our due diligence.

To apply, complete our online application form – one of our Client Relationship Managers will review and get in touch to discuss your application. To find out more about IntaCapital Swiss SA facilities, please see here.

The top 4 risks to UK businesses in 2022

2021 was a year that changed the future of businesses, not only in the United Kingdom but on a global scale. From many retail businesses and hospitality venues closing to large corporate companies changing their business models to allow their employees to work from home.

With such a turbulent year for industries in 2021, what are the 4 top risks to UK businesses in 2022?

Business Interruption

Over the last 24 months, businesses have had to acclimatise to both Brexit and the Covid- 19 pandemic, impacts include advanced import and import costs, cashflow challenges, and supply-chain disruption. The epidemic saw numerous businesses forced to close their doors either temporarily or permanently, those in the retail and hospitality especially.

Cyber Crime

The Covid-19 pandemic saw a large-scale move to remote working which numerous businesses are still embracing 24 months on. Moving workers offsite introduces new access points for vulnerability, and the geographical spread of staff translates to thousands of routers and networks, amplifying exposure across a company’s IT ecosystem. Cybercriminals have exploited these vulnerabilities, plus the increased reliance on videotape conferencing apps, for marketable gain through conditioning similar to social engineering styles and phishing emails.

Climate Change

Climate change was the biggest challenge in 2021, being a prominent issue in the minds of numerous business leaders. The COP26 conference in Q4 2021 brought ‘loss and damage’- the expression used to describe the destruction being wrought by the climate extremity- under the limelight and this will probably remain high on the agenda at the COP27. Away from the egregious environmental impact, climate change can impact many companies’ business models and pose a wide disruption to organisations.

Legislation Changes

Brexit related legislation and regulation for businesses continue to evolve, from importing and exporting, to transporting goods to the EU, swapping data, and reclamation of people from outside the UK. Organisations have naturally also demanded to keep up with changing Covid-19-related regulations and measures and understand their liabilities in keeping workers safe.

How can IntaCapital Swiss assist UK businesses?

At IntaCapital Swiss, we facilitate funding for business and projects across the United Kingdom. With our expert team of financiers, we can offer new projects immediate working capital, subject to passing our due diligence, whether they fall under commercial, residential, infrastructure or leisure.

Find out more about how IntaCapital Swiss SA can facilitate multiple different facilities here.

What are some key funding facility terms and what do they mean?

Financial facility terminology can be complex and difficult to understand, which is why we have explained some of our main facilities in more simple terms below:

Collateral Transfer

Collateral Transfer is the transfer of assets from one party to another, which is frequently accomplished through the use of a Bank Guarantee. The Provider agrees to issue the Bank Guarantee to the beneficiary in exchange for a rental or return, known as a Contract Fee. Continue reading…

Bank Guarantee

A bank guarantee is a type of financial protection provided by a lending institution. The bank guarantee means that the lender will ensure that a debtor’s liabilities are met. In other words, if a debtor does not pay his or her debt, the bank will cover it. A bank guarantee allows the customer (or debtor) to purchase goods, purchase equipment, or obtain a loan. Continue reading…

Bank Guarantee Examples

  • A payment guarantee ensures a seller that the purchase price will be paid on a specific date.
  • An advance payment guarantee serves as collateral for reimbursing the buyer’s advance payment if the seller fails to supply the specified goods per the contract.
  • A credit security bond serves as collateral for loan repayment.
  • A rental guarantee serves as collateral for rent payments under a rental agreement.
  • A confirmed payment order is an irrevocable obligation in which the bank pays the beneficiary a predetermined amount on the client’s behalf on a specific date.
  • A performance bond serves as collateral for the buyer’s costs if services or goods are not delivered on time.

What is a Line of Credit?

A line of credit (LOC) is a predetermined borrowing limit that can be accessed at any time. If a borrower has an open line of credit, he or she can borrow money whenever necessary until the limit has been reached, as the money is repaid, it can be borrowed again.

LOCs are agreements between financial institutions — usually banks — and customers which stipulate the maximum amount of loans the customer can take out. If the borrower does not exceed the maximum amount (or credit limit) set in the agreement, they can access funds from the line of credit at any time. Continue reading…

What is a Raised Line of Credit?

Under the Collateral Transfer facility, bank guarantees can be used by the recipient to obtain lines of credit from a bank. Normally, a bank will not object to offering credit against a Bank Guarantee obtained in this way. An amount as high as 100% of the face value may be lent, less the advance on interest and bank fees. It is presumed, however, that lending rates range from 80-90% of face value. Continue reading…

How can IntaCapital Swiss SA assist?

At IntaCapital Swiss, we facilitate funding for many projects across the globe. With our expert team of financiers, we can offer new projects immediate working capital, subject to passing our due diligence, whether they fall under commercial, residential, infrastructure or leisure.

Find out more about how IntaCapital Swiss SA can facilitate multiple different facilities via our website: https://intacapitalswiss.com/news/construction/construction-funding-via-collateral-transfer/

The rising cost of building materials and how it’s affecting the Construction industry

Why are the costs of building materials increasing?

The fact that global construction demand has been increasing at an unprecedented rate, combined with the pandemic and logistical issues, has led to unprecedented shortages, delays, and higher construction costs across the board. The cost of materials on construction sites has reached an all-time high as a result of three major factors that contribute to the price hikes.

There are several factors that are challenging the supply chain and resulting in an inflationary situation, starting with strong demand and limited distribution. Among the factors responsible for the strong demand for our products is the fact that countries around the globe are investing in the construction of infrastructure as a way to revive their economies. In response to the pandemic, governments are repairing and rebuilding in order to respond better to the crisis. This increases the demand for construction materials.

Secondly, the producers of these building products have been experiencing reduced productivity due to health protocols and government regulations, which has caused work stoppages in the past and continues to happen today.

A shortage of shipping containers is also a problem. Construction materials may take weeks to arrive on a boat, even if they are produced on time. Because of Covid, ports around the world had to shut down for weeks, including some of the largest in the world. What is the explanation for this? The ports are unable to process the cargo at the current rate of arrival. Cargo rates have risen rapidly, notably between Asia and North America, due to a stockpile of cargo containers mixed with global demand.

The following are some of the key factors that have contributed to such significant increases in construction costs over the last year:

  • HGV driver shortage and longer than usual lead times
  • High demand for materials in other parts of the world
  • Panic buying and stockpiling of materials by builders and contractors
  • Reduced supply levels due to Covid restrictions and robust demand for new homes, construction, materials, and labour

What do the rising costs of building materials mean for the construction industry?

The rise in construction costs puts additional strain on contractors and developers, as well as lenders, during the construction phase. Contingency budgets have already been maxed out in the relatively early stages of some developments simply to cover the cost of increased materials and labour.

Rising costs are especially concerning for contractors who signed fixed-price contracts prior to major construction cost increases. They are in pain because they are unable to apply for additional payments under the terms of a fixed-price contract.

There have been examples of developers and contractors modifying their contracts and developers making additional payments to ensure that their contractor remains solvent and able to complete their development.

Ultimately, it would usually be more cost-effective to pay an existing contractor more than it would to let them become insolvent and then attempt to tender the remainder of a part-built development in the current market.

What alternative funding facilities are available for the construction industry?

Typically, companies will obtain bank loans for their projects, and sometimes funding from private equity (PE), Venture Capital (VC) and in some cases, sovereign wealth funds. However, with increasing restrictions and criteria to be met by banks, companies are seeking funding from elsewhere. Those who have strong business plans could benefit from our financial facility, Collateral Transfer. This facility makes use of Bank Guarantees which are utilised as collateral or security to obtain loans and lines of credit from banks and non-traditional lenders. However, construction companies wishing to benefit themselves from the Collateral Transfer Facility will have to produce a viable business plan with a strong exit strategy. 

How can IntaCapital Swiss SA assist the construction industry?

At IntaCapital Swiss, we facilitate funding for many construction projects across the globe – ranging from supporting the purchase of materials, equipment, land acquisition to general construction costs. With our expert team of financiers, we can offer new projects immediate working capital, subject to passing our due diligence, whether they fall under commercial, residential, infrastructure or leisure.

Find out more about how IntaCapital Swiss SA can facilitate multiple different facilities via our website: https://intacapitalswiss.com/news/construction/construction-funding-via-collateral-transfer/

Brexit Trading Agreements

Brexit Trading Agreements Between the UK and Switzerland

When the United Kingdom voted to leave the European Union in June 2016, the Federal Council of Switzerland in September of that year unveiled its “Mind the Gap” strategy. This strategy was implemented on 1st January 2021. This strategy allows for both countries to retain their existing legal relationships post Brexit. Outlined below are the main agreements between the two countries.

The UK and Switzerland will continue to apply all existing air transport rules, allowing carriers to retain current traffic rights. The continued passage of goods and people by road will carry on as normal – No authorisations will be needed.

Post Brexit Trade Agreements

The trade agreement allows for relevant trade agreements with the European Union to be implemented between Switzerland and the United Kingdom which include:

  • The Free Trade Agreement (1972)
  • The Procurement Agreement (1999)
  • The Mutual Recognition Agreement (1999)
  • The Agricultural Agreement (1999)
  • The Anti-Fraud Agreement (2004)

It allows for Swiss and UK insurance companies to operate in each other’s jurisdictions, however, excludes life insurance. The rights of Swiss nationals in the UK and vice versa are protected under the Citizens Rights Agreement. This includes the free movement of both nationals, the recognition of social security entitlements and qualifications. The Police Cooperation Agreement enhances cooperation on both terrorism and crime prevention.

Exports to Switzerland

The exports from the United Kingdom to Switzerland totaled USD 19.94 billion for the year ending 2020. Pearls, precious stones, coins, and metals made up USD 14.20 billion, whilst works of art and antiques made up USD 1.55 billion. Other exports such as pharmaceutical products made up USD 426.28 million, vehicles, (other than railways) made up USD 490.72 million, machinery boilers and nuclear reactors made up USD 490.72 million, and organic chemicals made up USD 686.09 million.

Both countries have agreed on a continuing dialogue to improve migration, have closer cooperation on financial services, and further, develop economic and trade relations. In other words, it is business as usual with our Swiss friends. Both countries have gone out of their way to maintain a healthy and working relationship.

Post Brexit European Economic Area

Interestingly in early June 2021, Norway announced a post-Brexit trade deal with the United Kingdom, which also includes Iceland and Liechtenstein who together form the European Economic Area (EEA). Norwegian prime minister Solberg advised that whilst not on a par with the EEA agreement, the agreement reached with the United Kingdom is the most comprehensive free trade agreement ever.

The United Kingdom’s trade with the EEA for the year ending 2020 totaled GBP 21.6 billion. This agreement also includes reduced tariffs on haddock, prawns, and shrimps. This goes a long way to supporting the 16,000 jobs in the fish processing industry in the north of England and Scotland.

Summary

It goes without saying that leaving the EU was highly contentious as the United Kingdom was split down the middle. However, the government is continuing to move forward with independent trade deals with many countries, and as in the past, the United Kingdom will prevail as the EU continues to flounder under its own red tape.

Banke Guarantee 'Lease' or StandBy Letter of Credit Providers

What is the difference between a Bank Guarantee and a Letter of Credit?

A Letter of Credit or a Documentary Letter of Credit is a negotiable instrument and is a means of payment. A Bank Guarantee is a financial instrument and is a guarantee of payment. For information, a Standby Letter of Credit is a means of payment but can also be utilised as a guarantee of payment.

All these instruments are issued on a daily global basis. Here in Geneva, Switzerland, and in financial centers and hubs throughout the world.

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Are We Living In 1984

How the Automatic Exchange of Information Act is denying human rights to financial privacy
As we see new laws and regulations that are set to destroy financial bastions and banking privacy – and with that the tax havens of the rich and famous.

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