Accessing business finance in a post-Brexit world

 
Andy Davies
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It's broadly appreciated that uncertainty is the arch enemy of business development.

And if there’s one thing to be sure about, it’s that Brexit has pushed the level of uncertainty to an absolute peak, especially among the UK’s small and medium sized business community.

While the impact of the EU referendum on most businesses has so far been relatively limited, there is clearly a growing divide, with studies detailing that over half of Britain’s smaller businesses are still without any firm plans for how they will continue to trade after Brexit.

We are already starting to see these divisions – those businesses wanting to grasp funding opportunities while they are still available, and those holding out for more detailed information before making a move.

Of course, it’s very difficult for people to make definitive plans without full knowledge of how the landscape will change. However, businesses are already citing concerns that they will be pushed into making plans more quickly than they would like once the outcomes of the Brexit negotiations are confirmed.

What is clear, is that ceasing investment at this time is simply not the answer. Shelving investment plans based on Brexit uncertainties could see many businesses miss out on opportunities for growth.

If there is a change to traditional banking facilities, it is possible that businesses will find increased complexities in obtaining business funding post-Brexit. This is still an assumption, but one that must not be overlooked.

It’s reported that over 60 per cent of SMEs still only utilise one bank for all of their business banking, often because they don’t have the time or the money to form new relationships with new banks. And if that one bank tightens up its lending criteria or increases the cost of lending, small business owners will need to be positioned to look at alternative funding options.

Traditionally, bank lending criteria has been based on offering business loans for provable products. Businesses are changing, and as such, the finance needed to support them is also changing. Business finance providers such as LDF are now commonplace as an alternative to bank lending, mainly because they can consider a broader range of requirements.

We’ve seen a dramatic surge in people requesting business development loans. In fact, takeup on this product has more than doubled over the past 12 months as firms seek new and innovative means to spread the cost of less tangible requirements such as expansion plans, marketing, website development, and recruitment, all of which can be neatly parcelled into a short term loan that can really help to grow a business.

We have also recently added an interest-only loan, which is often used by businesses looking for a short term cash injection. This product has rapidly increased in popularity, with over £10m approved since its launch in January this year.

The immediate concern for firms now is the potential cash flow challenges created by a new, post-Brexit world. Improving access to cash flow is an increasing priority, but not an insurmountable one.

Behavioural change is key for smaller businesses as we move forward, and spreading regular liabilities can help to make sure they always have money in their business.

Whether you’re a business that’s growing or an established and stable firm, it’s essential to ensure a healthy position in terms of cash management. And ultimately, that includes thinking of the worst case scenario. The worst might never happen, but it’s crucial for businesses to consider all the eventualities.