Reprocessing “held back” by lack of investment experience

Research has found that while 6 billion in investment is needed by the sector over the next 15 years, only 16% of recycling businesses use lease finance in their business activities, compared to an average of 27% for SMEs in general in this country.

Dr Bevis Watts, manager of WRAP's business and finance programme, told letsrecycle.com: “Businesses need to be a bit more ambitious going forward. You don't get high growth in a business if it's just day to day activities.”

A survey from WRAP found that 42% of recycling companies feel they are being held back by a lack of capital. The organisation is aiming to counter the problem with two financial programmes – the Recycling Fund and the eQuip leasing scheme.

Recycling Fund
The 5.5 million Recycling Fund is an equity finance scheme, with 4 million from WRAP and 1.5 million from organisations including Barclays, Wastelink and public-private organisation Partnerships UK. It will see the Fund making investments in successful companies – effectively buying a share of those companies to provide capital for those companies to grow.

The Recycling Fund is currently a pilot, but hopes are that a much larger equity fund could be established after proven success. The company that manages the fund, Impax Asset Management, has been talking with about 70 companies with regard to the fund, and hopes to make its first “investment” in October.

Dr Watts explained: “The Recycling Fund is about making a return, but the criteria for returns are lower than traditional equity investments. We are looking for a return on that so we can say to the finance sector at the end to that there is money in recycling.”

eQuip
The other strand of WRAP's finance programme is the eQuip Residual Value Guarantee programme, which provides a financial guarantee so banks will lend money to recyclers for new machinery without incurring any risk.

The scheme has brought in five lending companies – Abbey National Business, State Securities, Bank of Scotland, Broadcastle and Mileshield – and is offering a total of 40 million to guarantee new recycling equipment.

Dr Watts said the scheme had already received applications for over 7 million worth of equipment, including four applications worth more than half a million.
“The largest interest has been in the plastics sector,” he said, “but it's been a mix of applications in terms of established and new start-ups. We've also had applications from some very innovative technologies such as colour sorting in glass and Cathode Ray Tube processing.”

The programme is actively recruiting more lending companies, but is also looking to provide help for recyclers in “deal shaping”. At the moment, Dr Watts said that recycling companies often don't have enough experience in submitting applications for investment, and too frequently submit “unrealistic” proposals.