Every day, more than 50 million households in England and Wales have access to high quality water, plumbing and drainage services provided by 32 private companies.
The industry was privatized in 1989. A regulatory framework in place at the time allowed it to invest over £ 130 billion in maintaining and improving services and facilities.
The activities of industry include the collection, treatment and disposal of waste (industrial and household). At the end of the preparation process, the output can be disposed of or be part of another production process.
In November 2020, the UK water industry became the first in the world to commit to delivering net-zero water to customers by 2030 – two decades ahead of the government’s target of net-zero by 2050. The hope is that other countries around the world will follow suit.
Despite this success, owners, managers and operators in the industry still face challenges when it comes to financing the maintenance or expansion of sewage systems.
In order to optimize assets and comply with legal / environmental obligations, these companies often participate in extensive investment programs.
Since water / waste companies don’t necessarily collect the money from their customers the year they invest it, they may also need additional corporate funding to meet their goals.
Because these types of companies tend to have many assets on their balance sheets and generate constant income through contracts with councils and the government, they may find corporate finance more accessible than companies in other sectors.
With Funding Options, the following types of financing might be suitable for you if you are in this industry and need financing:
Unsecured Term / RCF Loan
Unsecured funding is another popular option for water, sewer, waste, and remediation businesses. An unsecured loan allows companies to invest in new staff, buy stock for work in progress and future, and fund anything else the company needs.
What is a Revolving Credit Facility?
A revolving credit facility (RCF) enables companies to access cash to fund their business, repay it, and withdraw it when needed. The flexibility of RCFs gives companies the freedom to invest in other areas of business.
In contrast to a fixed-term loan with a fixed repayment schedule, companies borrow money for the agreed term of the financing, repay it, withdraw it, etc.
Some companies use their RCF to fund “one-time” purchases, while others use it more regularly to support their daily cash flow.
Water and waste companies often require heavy machinery and equipment (such as vans, trucks, refinery equipment). Rather than buying these assets directly and reducing their cash on hand, most companies finance the assets through hire purchase (where they own the asset at the end of the loan) or through a lease.
Hire purchase: definition
Hire purchase is a type of asset finance that allows businesses to pay for an asset in installments. After the installments have been paid, the company becomes the legal owner. For certain agreements, it will appear on the company’s balance sheet at the beginning of the term.
Equipment leasing: definition
Hire purchase can be a good solution for businesses that know they will need the asset for the foreseeable future. However, for those in need of equipment in the short term, leasing it can be less risky. Leasing is a way of leasing an asset for a period of time.
Some companies choose to return their industrial equipment to the supplier at the end of the lease, after the equipment has served its purpose. Others can buy it directly at the end of the period or upgrade to a newer version.
Invoice financing enables businesses to borrow money based on their customers’ debts and gives business owners quick access to up to 90 percent of the value of their outstanding invoices. It can be a suitable option for companies in the water and waste sector.
Since most contracts within the industry are either with government / agencies or business-to-business (B2B), most of the revenue is tied up in increased bills. Invoice financing improves cash flow and enables companies to grow and expand faster.
With selective invoice financing, the company can select specific customer accounts for financing, while spot factoring allows the financing of specific invoices.
When it comes to secured loans, there is less need for the company to have a good trading or credit history. However, secured funding is not the only option for companies performing water supply, sewage, waste management and remediation activities.
In the case of secured financing, the following assets can be used as a guarantee for the lender:
- Commercial real estate (e.g. warehouses, shops, and offices)
- commercial vehicles
- Heavy machinery (e.g. plant machines).
Would you like to finance a water supply, sewage, waste management or remediation project? See what your company might be eligible for today.
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