Business Overdrafts
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S4D
Read time: 3 mins Added date: 10/10/2024
Learn how S4D benefits from combining Lloyds Bank’s Invoice Finance and Debtor Protection facilities to help with cash flow, risk protection and business growth.
Cash flow and peace of mind are vital to running any successful business. Phil Marsh, Co-founder and Sales Director of mobile phone supplier and distributor S4D knows this all too well.
The past decade has seen many challenges as it’s grown from a start-up working with UK insurance companies to a multi-million-pound turnover business selling into retail and distributing handsets throughout Europe.
Scaling up hasn’t been without its problems, though. Improving cash flow and reducing the level of risk are only two of these.
Overcoming cash flow challenges
S4D has to pay for 90% of its stock upfront, with customers typically trading on 30-day credit terms. These agreements have historically caused cash flow problems and had a knock-on impact on forecasting and planning for growth.
Invoice Finance customers can have up to 90% of the value of their invoices advanced (usually within 24 hours). This facility gave Phil the confidence to reach out to new markets, safe in the knowledge he could draw down cash whenever needed.
Cash flow isn’t the only issue companies in all B2B industry sectors run into. There’s also the problem of understanding risk when entering into new contracts and the problem of bad debt. The Lloyds Bank Debtor Protection facility can protect up to 90% of the value of an invoice when a customer doesn’t pay or goes into administration.
In its first three years of trading, S4D didn’t have any form of Debtor Protection Insurance; customers were trusted only on their word and reputation. This facility now helps to shelter the business from significant risk and provides Phil with peace of mind when orders worth millions of pounds are at stake.
When the unthinkable happened
Unfortunately, this worst-case scenario became a reality for S4D in early 2024. A high-profile customer trading for over 20 years went out of business almost overnight. It happened so quickly that Phil’s team had shipped stock to them only two days before. With S4D having Debtor Protection in place, they were able to use the online system to record the incident and successfully claim 90% of the total amount they were owed.
“Without Debtor Protection, I dread to think what the consequences would have been to have wiped out half a million pounds of cash flow overnight. No matter how well you know your customer, the unexpected can happen. This situation shook our entire industry because it all happened so quickly,” Phil states.
He was able to go online and use the e-bonded system to submit all the documentation for his claim quickly and easily. Phil wishes he’d taken our Debtor Protection sooner and says it’s the last thing the business would switch off as a cost-saving activity.
A reassuring partnership
So, how have Invoice Finance and Debtor Protection helped S4D grow? Phil acknowledges they would have lost out on new customers if they’d continued without these facilities because the lack of cash would have meant being unable to buy and supply products in large enough volumes to meet demand.
“Even if you foresee no risk, it’s good to have the reassurance from the Lloyds Bank underwriters before making major financial decisions,” he affirms.
First-class communication
Having banked with other providers in the past, Phil values the seamless integration of having everything under one roof and also uses FX facilities from Lloyds Bank.
“The communication from Lloyds Bank goes above and beyond all the other providers we’ve banked with. For example, I can ring any of my contacts, and I know they’ll get back to me within the same day. We’re treated like a big corporation, and everyone knows who we are.”
Phil Marsh, Co-founder and Sales Director, S4D
Prompting important conversations
Lloyds Bank’s Invoice Finance Client Manager appreciates the role of Debtor Protection in encouraging business owners to be more proactive. “Without Debtor Protection, businesses often discover issues with new customers only after problems have occurred, as internal risk and financial checks may not catch everything in advance.
“A simple step such as checking a credit rating can prompt a conversation with a client, especially if they are already trading at levels above this rating when they take out Debtor Protection,” she observes.
Factoring and Invoice Discounting may be provided by one or more of Lloyds Bank Commercial Finance, Lloyds Bank plc or Bank of Scotland plc. Asset Based Lending and Debtor Protection facilities are provided by Lloyds Bank Commercial Finance Ltd. or Lloyds Bank plc. Lloyds Bank Commercial Finance Ltd. Registered Office: No.1, Brookhill Way, Banbury OX16 3EL. Registered in England and Wales no.733011. Bank of Scotland plc: Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland No.SC327000. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration no. 169628.
We are a member of UK Finance and subscribe to the Invoice Finance and Asset Based Lending Standards (“IFABL”) Framework and Code. The Code can be found here.