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/

Commercial Port Development – Adriatic

Proposal

Collateral Transfer Facility – Collateral Injection with Credit Line and Investment.

  • Brief : To obtain strong collateral to secure both private investors and commercial lending facilities.
  • Total Facility Requirement : € 52 million

Facility Obtained

Balkan based Provider Group with Dubai based Lender

  • Facility Secured: Collateral Transfer Facility of € 52 million Secured Private Investment of €44.2 million
  • Annual Contract Fee : 5.75%
  • Term : 12 months (renewable to 3 years if required)
  • Deposit against Contract Fee : € 355’000

A European based development consortium had laid detailed plans for the development of a sea port on the Adriatic Coast. The development consists of both commercial sea port facilities, storage facilities and a residential development encompassing a private marina for leisure craft.

IntaCapital were successful to secure for the client a Collateral Transfer Facility and private investment for the project to a value over €40 million. We assisted the consortium with various aspects of licensing and approval by promoting inter-client relationships and where existing clients of IntaCapital based locally (with local connections and knowledge), assisted this client achieve their goals and objectives.

Whilst this project is still on-going, IntaCapital and our associates in the region continue to offer support and assistance to our client. Part of this assistance was to maintain the facility and to ensure it is quickly assessable upon demand, even though the facility has not currently been fully drawn-down. We look forward to presenting more information in the future on our achievements with this exciting on-going project.

In what form is “Collateral” injected?

Collateral Transfer facilities are commonly, and more importantly, are wrongly referred to as Bank Guarantee ‘leasing’ as this document will explain. Despite, the injection of capital or collateral is made by the Provider to the Recipient via the Issuing Bank and the Recipient Bank, there is actually never any mention of the word ‘lease’ or ‘rent’….

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