The past year has seen a growing demand for finance, but with significant changes on the horizon in 2019, businesses will need increasing support to realise their dreams, writes Nucleus Commercial Finance’s Simon Willmett.
British businesses have seen rough times in 2018, and many found themselves worrying about an uncertain future. Brexit, particularly, was a key cause of concern as business owners worried about their supply chain, customer retention and the state of the economy.
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We have seen political indecisiveness breed instability, which has eroded consumer and investor confidence.
As an alternative finance provider, businesses come to us for a range of reasons, and in the past year a large number are finding that uncertainty is holding business back and restricting planning.
We see uncertainty as a critical hurdle, restricting both the growth and development of businesses, and impacting the bottom line for UK plc.
REASONS FOR STRUGGLE
We see businesses struggle for, more or less, the same reasons every year. Often they were over-reliant on single clients, too short-sighted in their planning and lacking protection from external forces.
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By GlobalDataOf course, there are also those that are mismanaged, but most commonly we see a perfect storm of many factors that feed into financial distress.
To solve a financial problem, the majority of businesses approach their high-street bank. However, banks can be highly selective and not necessarily easy to work with. Businesses in distress do not always get the support or understanding that they need.
We believe that these businesses need somebody who has taken the time to
understand the bigger picture and realise the opportunity at hand.
Overcoming financial difficulties for businesses is often a case of ‘when’, rather than ‘if’, and to do this effectively it is all about planning.
FOUR KEY FACTORS
In order to successfully manage a company out of a financial slump, we have seen the following four factors as most vital:
1: Recognising the situation Burying your head in the sand will not work. It is necessary that business owners recognise the conditions in which they find themselves, and not rely on best-case scenarios or miracles.
2: Seeking help Most SMEs do not have a dedicated financial professional, which amplifies financial difficulties resulting from a knowledge gap. This is where advisors, supporters and professionals can provide that all-important knowledge, insight and specialist experience in managing turnarounds. Directors may find themselves successfully managing their businesses in good times, but when times get tough, the same strategies and tactics may no longer be viable.
3: Drafting a robust plan Mapping out a realistic plan will give a sense of structure and action in a time of confusion and uncertainty. Anticipating further developments and scenario planning will provide tangible examples of what may happen.
4: Speed The speed of delivering finance can make or break a business turnaround. The speed at which a firm applies for a loan is just as crucial as the speed of the lender processing it.
FINDING A SOLUTION
Businesses in complicated financial situations often need the benefits of more than one product to achieve a solution that works for them. Our breadth of experience, coupled with a broad product range enables us to build a variety of solutions that flex to the situation.
Asset-based lending (ABL) is particularly useful for businesses that have a range of assets – from plant and machinery to property and stock – that they can leverage.
The recently released figures by the Finance & Leasing Association indicate a clear trend of businesses increasingly securing asset finance, with the October data showing a 9% increase from the prior year.
The value of ABL can be amplified when coupled with property finance or an injection of cash flow, providing access to secure funding with flexibility for future bumps in the road too.
Over the past year we have seen that there is a growing demand for finance to expand, but with significant changes on the horizon in 2019 businesses will need increasing support to realise their dreams.
We urge the experts and advisors assisting businesses to identify their pain points and help ready them for the future. With this support, businesses will look ahead with optimism for 2019.
