According to a recent report published by Begbies Traynor, some 630,000 UK businesses were in "significant financial distress" through Q4 2020 - A startling number which shows a 13% increase on the previous quarter, a 27% increase on the same period in 2019 and most importantly, doesn't take into account the effects of 'Lockdown 3.0' which continues to stifle the UK economy.
Thousands of businesses have seen trade disrupted as a result of the pandemic with many turning to additional borrowing and/or deferment of taxes (Corp, VAT, NI etc), rent and rates in order to survive. However, with the continued disruption to trade, some may be unable to generate sufficient cash to service the additional liabilities and ultimately, remain viable.
The report highlights the scale of the financial crisis looming over the UK economy and ties in with recent suggestions of a return in 2021 for the 'Bad Bank' - a term used for the specialist bank units where businesses showing signs of financial distress are typically transferred - which in turn could signal a tightening of credit appetite across mainstream lenders.
If these rumours become reality, we may well see 'high street' lenders reducing their focus on new lending and moving toward managing those customers facing difficulty, in breach of covenants or demonstrating signs of financial distress.
However, as banks move to manage risk and protect their balance sheets, an opportunity will arise for alternative and specialist lenders to enter the market and play a crucial role in helping businesses survive and thrive.
In addition to the high street banks, there are over 130 alternative lenders operating in the UK commercial and business space - These alternative lenders differentiate themselves through varying approaches to risk, by specialising in certain sectors and providing flexibility in their funding solutions.
If the availability of mainstream funding does begin to contract through 2021, it's important that business owners and managers are aware of the wider choice of alternative lenders in the marketplace - These lenders may be able to support with additional funding requirements, refinancing of current facilities or bridging financial pressures which could threaten ongoing viability.
The world of commercial finance can be a busy and convoluted place so to help businesses navigate the options available to them, engaging with a capable and connected commercial finance broker will be crucial - At KeySME we have the experience and knowledge to guide you through the funding marketplace.
Get in touch today to see how our simple, transparent, tailored approach could boost your business.
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