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Further Education Finance: The Apprenticeship Levy

The next great transformation in technical and further education is nearly upon us, and for those colleagues charged with the unenviable responsibility of triple checking your RoATP applications and supporting lenders, we salute you. 
However, the collective sigh of relief from the sector on Friday 25th November at 5pm may well be short lived! There can be no assumptions made in terms of the immutability of apprenticeship funding or further education finance any longer, thus having the potential to cause greater angst for providers. 
This is especially the case for those institutions whose further education finance has been traditionally funded by a grant and have approached employers, and a significant number of subcontractors, with something of an easy sell. “Can we spend our money with you please?” went the opening gambit to employers in previous years. From May 2017, the question will be indelibly rephrased to “Please… will you spend your money with us?”. This is a fundamental shift in focus for those providers charting a successful course through the stormy waters of the register application process.  
There can no longer be a perfunctory attitude towards employer engagement to keep the LEP happy or to chart well in a sector survey. The time is ripe for the independent provider, struggling for many years to build employer relationships, to undergo cash flow issues and take risks. In essence, to run a business that has to sell to its customers to keep afloat. 
From May 2017, we will have a free market for apprenticeships, where the best independents and colleges survive and employers are fully in control. These employer customers now choose the providers that they want to work with and hold the purse strings to both the Levy and Non-Levy payment mechanisms for providers. If an employer of any size does not pay the 10% cash contribution, then providers don’t get the 90% profile payment from the Skills Funding Agency.
Now that employers hold the purse strings it is worth some organisational self-reflection; would you pay someone that is providing a terrible service? The answer is likely to be; maybe once, but certainly not twice, as a free market enables choice and allows employers to vote with their feet. Of course, in business there is always another provider looking to take your place. 
So, in essence a post May 2017 provider needs to have all the following in place; achieving a seat at the head table via RoAPT, employing a great sales team, providing excellent customer service to retain employers and then collecting their payments on time to unlock funding from the SFA. However, there is a significant payment lag in place and this provision will be cash hungry, where is the money coming from to pay for all this? As Matt Garvey rightly asserts in his excellent article for TES, "The terror of levy funding and mandatory cash contributions will be cash flow. Providers will need to find a way to account for late payments by employers." 
For a sector that has significant cash dips at pinch points throughout the academic year this will be a real struggle, especially when the big two high street banks that have 90% of the further education market are looking to retract their position rather than become further exposed. This is where an agile, alternative financier can help. Nucleus Commercial Finance has designed a number of cash flow finance solutions to facilitate the ability of providers to fund their growth plans with further education finance when the market dictates, rather than when the funding drip feeds through under the new regime.

If you would like to find out more about our cash flow finance solutions or our other services such as our business overdraft or property finance options, get in touch with one of our experts. 

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