Credit Insurance proves essential to business’ growth
Lloyd Mouldings, based in Brackley, Northamptonshire, is a specialist provider of wood mouldings, decking and flooring to the construction industry and private customers.
The company was established 18 months ago as a separate business arm to Lloyd Woodworking Ltd which provides joinery services.
The construction industry was amongst the hardest hit by the recession as the number of large contracts available for tender decreased and the sector slowed down. In order to protect cash flow, Lloyd Mouldings sought out a solution to safeguard its sales ledger, a crucial asset for a new company.
Recently, one of Lloyd Mouldings’ construction customers filed for administration. A significant balance remained with the debtor which would have seriously affected the firm’s working capital if it had been left unpaid.
Lloyds TSB Commercial Finance’s role
Lloyd Mouldings approached its banking partner, Lloyds TSB Commercial in November 2010 and their relationship manager introduced the business to Lloyds TSB Commercial Finance, the asset based finance division of the bank.
The funder provided Lloyd Mouldings with a debtor insurance policy, through its relationship as Authorised Representative of Chartis Insurance UK, this protects up to 90 per cent of bad debts suffered as a result of non-payment of invoices or customer insolvency. The cash can normally be recovered within 30 days of receiving confirmation of debt.
The debtor insurance facility paid out over £47,000, to the £250,000 turnover company, safeguarding its sales ledger and ensuring it could continue to grow unimpeded as bad debt didn’t slow the business’ excellent progress.
The result
Now the company is in a strong position to reach its turnover targets for the year and continue its sustained growth.
What the team said
Andy Wright, managing director at Lloyd Mouldings, said: “For a young company setting up in a fragile sector in a challenging economy, we felt it was necessary to insure all assets, including our cash flow.
“We approached our banking partner, Lloyds TSB Commercial, who in turn introduced us to Joseph Simpson in the funder’s debtor insurance department.
“Joseph understood our business model and requirements and worked closely with us to implement the debtor insurance policy.
“When one of our bigger customers was declared insolvent, we would have undoubtedly been very seriously affected without the policy in place to safeguard our cash flow.”
Lloyds TSB Commercial Finance Debtor Insurance analyst, Joseph Simpson, said: “A business credit insurance policy like debtor insurance provides vital peace of mind for management and safeguards against bad debt, which can destroy a firm’s growth plans and ultimately lead to further trading problems.
“It’s encouraging to see that, with the facility in place, Lloyd Moulding is now pushing forward and thinking strategically about expansion plans. I would advise other businesses in the construction industry to take a leaf out of this firm’s book and protect cash flow.”