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Planning for recovery

Now is the time for businesses to look again at their funding options, says Ian Hardman.

Ian is one of our guest speakers at our forthcoming Scale-up Forum on April 29th on how to secure external finance to meet growth ambitions.

As we gradually come out of this third lockdown much has changed since the first time we were all told to stay at home a year ago. Vaccines have of course been rolled out at pace, while in terms of supporting business we were far better prepared with significant and broad-ranging financial support packages already in place.

Although more difficult decisions undoubtedly need to be made and future strategies re-planned, the vaccine programme provides increasing hope and confidence that the worst is now firmly behind us and we can now plan in a more positive manner.

For SMEs this couldn’t be more essential. They remain the backbone of the UK, making up 99% of all businesses and contributing in excess of £1.9tn to the economy and more than 60% of all jobs. It’s in everyone’s interest to see the accumulative revival and growth of these businesses over the next 12 months, albeit that many will undoubtedly wear the battle scars of 2020.

The year ahead

Don’t get me wrong, 2021 will undoubtedly not be easy and for many businesses, with staff still working at home or on furlough, the turn of the year hasn’t brought any less worry. Indeed it goes to show how uncertainty in business is all too common - once one issue resolves itself there is always another ready to come to the surface and take its place.

Just as many businesses have coped admirably with so much uncertainty over the past 12 months, so they will now face numerous challenges as they seek to grow again.
Certain sectors - most notably hospitality, leisure and retail - have been impacted materially and will likely continue to suffer heavy losses and consolidate.

Also, many businesses now carry unexpected additional debt on their balance sheets through one of the various Coronavirus Loan Support Schemes. Or they have seen their healthy liquid reserves eroded to maintain their going concern and therefore are looking to drive growth now from a different financial base.

Pace of change

More broadly, the pace of change and new challenges that business owners have faced has been unrelenting, and we still have some large obstacles to overcome in the immediate post Brexit and COVID-19 landscape.

Prioritising business strategic planning and remaining flexible and adaptable will continue to be crucial to any future success for SME owners in this environment. Strategic planning, with regular review, allows businesses to stay ahead of uncertainty by identifying and mitigating new and emerging risks for their business.

These risks come in various forms from changes in manpower or skilled labour, from the continued rapid acceleration of digitisation/automation, and from unknown changes in the supply chain or maybe volatility in foreign exchanges.

In this climate it’s vital that businesses are regularly talking to their banking partners and funding providers, especially as the pandemic continues, to keep them abreast of performance and potential challenges.

For instance my team of regional relationship managers have been checking in with our customers regularly, offering whatever support and guidance we can – whether that be financial (in the form of a Coronavirus Loan Scheme facility or other funding solution) or simply providing a friendly ear to listen, re-assure and check the wellbeing of the management teams who have been in the firing line for a prolonged period.

Funding streams

Earlier this year Chancellor Rishi Sunak announced a further £4.6bn in one-off grants available for SMEs. This was in addition to the Coronavirus Loan Scheme support already available and which recently closed for new applications at the end of March.

From April 6 the new Recovery Loan Scheme (RLS) also opened for applications, as the follow up to the Coronavirus Loan Scheme, providing additional financial support through a panel of eligible funders, such as ourselves, to help businesses invest and grow their business. Up to £10m is available to a business through a variety of products such as term loans, overdraft and asset finance solutions.

The RLS provides a government guarantee to funders where the provision of security is not available from the customer to help when structuring the facility, and potentially provides the liquidity to support the strategic growth of a business that might have had limitations to the security it would normally be able to provide to secure the funding line.

Reviewing options

In short, whatever their position, now is the time for businesses to look again at the options available in the months and years ahead. This applies equally to those that are simply starting to plan for emergence from a prolonged lockdown hibernation, and to those more fortunate businesses which can plan for a more aggressive growth strategy.
Whatever their position, my advice is that they talk to their existing relationship managers as early as possible to discuss the best combination of financial support available to support their growth plans.

Ian Hardman is Head of Regional Banking, Commercial and Corporate, at Virgin Money

Blog posts give the views of the author, and are not necessarily those of Alliance Manchester Business School and The University of Manchester.

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