Whether you are a small to medium sized enterprise or a larger corporate entity, the last 2 years have been challenging for everyone with some sectors faring better than others. Even if in the same sector, every situation is very different. The key, when identifying business challenges, is to seek advice as soon as possible, as time can often be a determining factor. Given that this is a very different crisis to 2008, Opus Partner, Adrian Chambers, reviews the current finance landscape and discusses the options available for businesses looking to raise finance.

Initial financial support measures

The Government and the wider financial services market played an important part in deploying cash under its various schemes and initiatives, providing an essential lifeline to UK firms who were forced to cocoon aspects of their operating businesses. There were of course other temporary legislative provisions introduced that were designed to protect industry wholesale and ensure the adoption of the ‘we are all in this together’ message.

The question asked by many, is ‘did it work?’ Without wishing to bring any political biases into focus, the general view is that the financial support measures did the job intended, but they came at a cost, and some aspects were certainly more successful than others.

These measures were, of course, no ‘hand-out’ for businesses, but rather a necessity in order to survive, with borrowers ultimately required to service both debt and interest over time. Consequently, many businesses have had little alternative but to take on increased levels of debt, and in doing so, hoping that normal trading would eventually bounce-back in order to repay it.

Current financial landscape and working capital solutions

So, 2 years on, what does the finance landscape for businesses look like and what are the current challenges they now face post pandemic?

It’s fair to say that the RLS scheme, and its various iterations before it, have been used by many businesses to simply keep heads above water. As businesses now emerge post pandemic, attentions are turning to other working capital solutions as directors juggle with both increased demand as customer confidence returns and dealing with an inevitable credit squeeze with suppliers.

The effects of the pandemic have been on a global scale and with the worst affected businesses reporting trading losses and increased borrowing, the credit insurance market has tightened consequently, resulting in suppliers needing to reduce corresponding lines of credit. With added inflationary pressures and increased costs and general supply chain issues, the knock-on effect to businesses has been hugely challenging, with directors needing to look at other ways of releasing cash tied up in assets on their balance sheet.

What does this mean for borrowing and what are the debt repayment options?

For many, cash has been tied up in debtors and stock – with ‘forbearance’ also having played centre stage during the pandemic, debtor days were inevitably pushed out across many sectors that affected cash flow. And whilst businesses will have balanced this equation by seeking similar arrangements from its creditors, many are now availing themselves to the benefit of invoice finance, trade finance, structured asset-based lending solutions and revolving credit facilities to help improve working capital.

Unlike the financial crises of over a decade ago, the alternative finance markets are awash with cash and are keen to deploy.

Viability testing of course, is a prerequisite requirement for many lenders with businesses needing to demonstrate profitable trading to service new debt and any pre-existing. Those with strong internal financial reporting and an ability to deliver accurate forecasts are advantageous in any credit application process.

Financial challenges haven’t disappeared for business owners, but there are viable solutions available

Inevitably, there are businesses continuing to encounter financial challenges to growing their business post pandemic. Some key points to note:

• For many directors facing such situations there are options available that may include debt restructuring scenarios where fresh working capital may be available as part of a transaction.
• Every situation is very different, the key in such circumstances is to seek advice as early as possible – time can often be a determining factor.
• Dealing with complex situations that also involve creditors or financial institutions and researching the best deal can be a lot to deal with on top of the day job.
• Support is available so that businesses have access to all the necessary tools to recover from the pandemic

The breadth of solutions available

We are seeing continual growth in the number of directors seeking professional advice for financial business solutions. Giving them peace of mind that they have obtained the best deal for their business, achieved in the timescales needed.

If your business is looking to improve its working capital and have been affected by any of the situations in this article, please contact the Opus team who can provide advice and guidance on the range of solutions available to you.

Opus has offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.