• Growing a business
    • Raising finance for an existing business

End to end funding unlocks growth opportunity for Star Tissue

  • Article

When UK manufacturer Star Tissue saw an opportunity to invest for growth to meet market demand, an integrated trade and asset finance solution provided the perfect funding combination.

Star Tissue manufactures hygiene and paper products for businesses across a range of sectors. Established in 2003, the family run firm is based in Blackburn and has seen its growth accelerate considerably over the last five to six years.

With demand increasing, Star Tissue was keen to invest in new machinery, explains Khalid Saifullah, Managing Director of Star Tissue: “We were already running at full capacity and it was clear that we needed another production line to enable us to make more product to meet that increased demand.”

And that wasn’t the only consideration for this dynamic business. “We want to be the best in what we do,” says Khalid, “and to achieve that, we need to invest in better machines to manufacture better quality products. We also want to remain competitive, so we need machines that can produce our products a lot faster and more efficiently.”

Financing growth

The machines Star Tissue identified to help increase capacity and pursue its growth plans were manufactured in Italy – a market leader in the paper products industry. “Italy is the tissue capital of the world,” explains Khalid. “It’s where the quality machinery and the latest technology comes from. If you want to be a leading business, that’s where you need to buy from.”

A long-standing HSBC customer, the business had previously used asset finance to fund its purchases, and with the new machinery costing in excess of £1m, Khalid was keen to secure HSBC’s support once again. “We would normally look to fund the 30% upfront cost of the machinery payable at point of order ourselves, with the remainder funded through HSBC asset finance,” says Khalid.

A joined-up approach

It’s a solution that’s worked well for Star Tissue when purchasing equipment from within the UK, says Richard Morrall of HSBC Equipment Finance. “However, when the equipment is shipped from overseas, asset finance can’t kick in until the machinery arrives in the UK and our customer takes ownership,” he explains.

With the equipment shipping from Italy and Serbia, that created a funding gap. Working closely together, specialists from HSBC’s Asset Finance and Trade Finance teams were able to create an end to end funding solution to support Star Tissue’s requirements.

“Trade loans are typically used to finance stock, and asset finance to fund equipment, but sometimes the two overlap,” explains Diane Davies, Senior International Trade Manager at HSBC UK’s Global Trade and Receivables Finance. “In this case, the priority was to create a solution that supported Star Tissue’s investment plans in as seamless and quick a way as possible. The trade loan was in place for when the equipment was ready to inspect and the supplier needed payment, and the asset finance facility immediately repaid the trade loan when the kit arrived in the UK.”

Without HSBC coming up with a solution to combine an import loan with an asset finance facility, it would have been difficult for us to purchase the machinery we needed when we did.


Bridging the funding gap

“Using an import loan to bridge the gap between the machinery being manufactured and shipped and its installation in our factory, was really important,” says Khalid. “Without HSBC coming up with a solution to combine an import loan with an asset finance facility, it would have been difficult for us to purchase the machinery we needed when we did. It may have meant reconsidering or waiting a bit longer to build up our own funds to manage the transaction, and that would have meant a missed opportunity and impacted our growth plans.”

The integrated solution has brought a number of benefits for Star Tissue says Khalid. “It has allowed us to use asset finance to support our budgeting and cashflow, rather than having to take out a separate loan, or dip into our own funds.”

The process itself was straightforward too, with the HSBC teams working closely with Star Tissue to meet the timeframe needed. “The machinery had a 12-month lead time, so we worked together to create a schedule for the different funding to kick in,” says Khalid. “It was all very seamless. Once the machinery arrived, the asset finance facility paid off the import loan automatically. We literally didn’t have to do anything.”

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