Insider Media Limited

Midlands-based manufacturers are at a disadvantage when it comes to receiving funding. That's the view of Birmingham-based insolvency practice Poppleton and Appleby, which is urging banks and businesses to rethink their policies.

Gavin Bates, senior manager at the firm, said the combination of a high volume of manufacturers in the region, the industry’s reliance on credit and a shortage of available funding has made manufacturing "a major area of concern".

Bates said: "Many of the manufacturers we have been called in to assist are not having trouble taking orders. What they are struggling with is convincing the banks to lend money to cover their overheads.

"There is often a period of three to six months between taking an order and receiving payment, the lead time. Manufacturing companies have to finance the costs during this lead time.

"The finance to cover that used to come from banks but they are less willing to lend, and that causes many to struggle, which in turn affects the credit ratings of manufacturing companies - it becomes a vicious circle."

Recent figures show that 3,657 businesses became insolvent in the first quarter of 2011 with the worst affected sectors being construction (614 business failures) followed by manufacturing with 452.

Bates added: "Manufacturers and banks need to get back to basics to avoid problems before it is too late.

"Lenders and business owners need to sit down and understand exactly what each other need to plan for the long term now rather than in three months’ time."