Finance after Lockdown

Despite the understandable anger and frustration at the governments latest tier system, there are signs that the UK economy is moving and businesses are becoming more active. The government’s assistance to businesses of all sizes during the pandemic has been well publicised, with BBLS, CBILS, JRS etc. all doing huge amounts to help businesses get through the worst of it. However, it remains to be seen how prepared companies are when it comes to ensuring they are able to trade out and get back to where they were pre-pandemic.

What will be of vital importance is that companies start looking at and understanding the numbers as soon as they can. Preparation will be key in allowing them to get through this. Many may even come through it stronger in the long term. Ensuring they are working with advisors, accountants, turn around professionals (if required) and funders to understand their needs in the short and long term will be key to making sure they are in the best possible shape to move forward.

There is a growing feeling that companies that have never required any sort of financing in the past will need something in the future. Even if it is just for the short term until they return to normal. This will mean there will be a lot of companies leaving their comfort zone and taking on funding they have never needed in the past. Companies also need to ensure they are in a position to repay the loans they have taken, as well as any HMRC arrears they have built up during this time. Anecdotal evidence suggests that many of these companies will be wary of signing into long term contracts and finding themselves tied into a facility they no longer need.

So which facilities would be suitable?

Arguably Selective Invoice Finance allows companies to access cash against their invoices straight away to help manage cash flow as and when required. Typically, there are no minimum fees or non-usage fees, and the facilities tend to be on an open-ended contract. This gives the flexibility for the facility to be used as and when required, whilst allowing for costs to be controlled. Once a company returns to normal, this type of facility can then effectively ‘sit on the shelf’ without incurring any fees, but available to smooth out any other cash flow bumps along the way.

These facilities can also act as an effective way of easing a company into longer term finance facilities as well. They allow a company to get used to the idea of factoring and to understand how the processes work, without them having to take the plunge straight away. If and when they need to move into a full factoring facility, it is a very simple transition.

The companies that are best prepared to deal with the rebuilding efforts needed in 2021 and beyond will be the ones that will succeed. Without preparing and understanding what challenges they will face in 2021, companies will undoubtedly struggle and become another casualty of covid.  

What are your thoughts on the finance requirements likely to be needed in 2021? and How will risk be assessed given the impact of covid on the numbers and trading performance?