In my last article I focused on the future of our economy and, to put it bluntly, my fears that the current impact of the lockdown measures was nothing compared to what is yet to come. Fast forward and there are signs that things are starting to look up. Many lockdown measures are, at the time of writing, being eased – and the key indicators that the government are monitoring appear to be heading in the right direction.
However, any form of pre-COVID normality is, sadly, many years away. The loss of life can never be replaced, and neither can the loss of livelihoods. I’m sure we all have tales to tell of businesses that have already lost everything, or cannot see a viable path ahead.
Those that have been lucky enough to benefit from a government grant or loan may have a chance at survival. But how many more zombie-like businesses will fail once the repayment holidays come to an end and/or loans need repaying?
Advisors are needed more than ever
Being a glass-half-full kind of a guy, I am ever hopeful that the important role advisory-led intermediaries have to play will finally be recognised and signposted. This is something that should have happened after the economic crash of 2008. My daily LinkedIn catch-ups show me there are still numerous highly skilled and experienced professionals around.
Despite suggestions that fintech-driven lenders and online brokers are the future and will one day rule the world, it’s clear this will never be the case. It wasn’t the case pre.lockdown and it certainly won’t be after.
As we move out of lockdown and onto the thin ice of normality, businesses will be yearning for someone to talk to. This is already happening to a small degree but, as we know, the real economic hit is yet to come.
“What are the options for lending in the future going to be?”
Honest conversations
During my new daily routine of home.schooling, mammoth countryside walks and Netflix binges, I have enjoyed the open and honest conversations I’ve been having, in particular with some of the lenders that have kept UK businesses afloat following the demise of the banks.
There are so many questions yet to be answered, especially for those non-bank.backed providers who are now battling to provide forbearance and to satisfy the people they get their funding from, while also trying to meet demand for new lending in the future.
With debt levels at a record high and the affordability parameters being stretched, I would guess that some non-bank lenders are fast approaching the point of being unable to offer any new lending.
But what then? As a nation that boasts a wealth of entrepreneurs and business leaders, what are the options for lending in the future going to be?
Businesses that are either cash-neutral or cash-rich following an injection of government support are likely to try and stay inside that ring of financial security for at least 12 months. In addition, many may already have existing facilities, including invoice finance, overdrafts and loans, that will help to sustain them through the next few months.
Those that are fortunate enough to have benefited during the lockdown and can see a guaranteed future may consider taking on additional debt, but should only do so having taken advice first. The next challenge is then to find the best-fit lender and, hopefully, one that is still lending!
Confidence is the key requirement
I note that the car industry is now offering various financial incentives to help stimulate their desperate cause. If anyone was thinking of purchasing a car or commercial vehicle, call your local dealer today. Sadly, their offering leapfrogs over those asset finance providers that are also fighting for business, but it does demonstrate how our market needs to change and adapt – and quickly!
I am no expert in commerce, but you don’t need to be if the questions being asked are around how to stimulate a marketplace. Mortgage providers should also be toying with the reintroduction of a 95% LTV offering, and with rates at the lowest they have ever been, you can be certain that applications will come flooding in. It is simply about adapting to market conditions and instilling confidence in a business landscape that has less colour than my parched, sun-beaten lawn!
There is sadly no crystal ball we can consult, but history shows that life goes on and returns to a new normal eventually. Asking questions is a good sign, and it confirms that we are all looking for the right answers. The door is wide open for new and existing lenders to adapt, evolve and deliver.
David Grosse, Managing Director,
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