Financing for growth – how the Clydesdale Bank helped Brightwater manage its cash flow requirements

It can be tough finding the right funding stream for your business, especially if the business is a start-up. Lenders find it difficult to support young businesses due to the level of risk involved but alternatives to traditional types of bank funding exist and the ‘alternative finance’ market has grown dramatically in recent years to offer businesses the finance they need.

New Scottish based water utility company Brightwater, was looking for a finance partner that could provide a solution to help manage its working capital requirements. It approached a number of different finance providers before choosing the Clydesdale Bank.

Within the water industry, licenced providers (retailers) are required to pay Scottish Water, the wholesaler, two months in advance for its customers water usage. This leaves a gap in their cashflow before receiving payment for the water from their customers. Brightwater needed to find a financial institution that would provide a lending facility to cover the period between paying Scottish Water and receiving customer payments.

As the business grows and its need for increased financing increases we will continue to work with Brightwater to fund its growth plans.

When Brightwater approached the Clydesdale Bank for help, the business had recently gone through a successful equity fundraising process and the bank regarded their approach favourably.

Michael Mackie, Relationship Manager, Commercial Banking, Clydesdale Bank, explains: “When Brightwater approached us we assessed the working capital requirements of the business. We were reassured by the fact that Brightwater was only paying for water used by contracted customers which meant that there was a guaranteed income stream; customers would be billed for the water they had used and this would cover the cost already paid to Scottish Water.

“We spent time meeting with the company’s Managing Director, Rich Rankin, to understand the business and its operating cycle fully so that we could offer the best financing solution. Once we better understood what Brightwater required it allowed us to pull in our colleagues across the bank to identify a solution that would best meet their requirements.

“We worked with our international trade colleagues as they were able to adapt an import/trade loan product that had been developed for companies with a similar trade cycle to meet Brightwater’s needs. One of the benefits of being a smaller bank is that we are able to share our knowledge and expertise, pooling our resources to identify, adapt and provide a financial product that was right for Brightwater.

“The financial solution we have put in place to manage Brightwater’s cashflow cycle can be best described as a ‘reverse invoice finance facility.’ It is a very bespoke product which we currently only offer to one other customer in the UK and provides a solution to manage Brightwater’s working capital requirements. This form of invoice finance means businesses can access funds to release the working capital tied up in their unpaid invoices.

“The solution we have put in place appears to be working for everyone involved. As the business grows and its need for increased financing increases we will continue to work with Brightwater to fund its growth plans. As one of the few remaining small independent water retailers in Scotland we are delighted to be able to support them. Clydesdale places a big focus on helping the SME sector across the UK and the bank has allocated £6 billion of funds to support SME’s from start-ups through to more established SME businesses.

Brightwater Managing Director, Rich Rankin, comments: “We needed to find an alternative to traditional funding and Clydesdale offered us a tailor-made solution. Our Relationship Manager, Mike Mackie, took time to really understand our business and the challenges we faced with our cash flow. With the right financing in place we have been able to concentrate on our business priorities – providing great customer care, growing our customer base and fulfilling our ambition to become one of the leading water retailers in Scotland.”