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Same smoke, different mirrors

David Grosse, founder and managing director of Number Eight Business Finance, highlights the difficulties facing the UK’s small businesses as they try to recover from the coronavirus pandemic

As we enter the 12th month of this extraordinary period in all our lives, I remain extremely concerned about small businesses – the “backbone of our economy” – and a lack of any form of economic physiotherapy.

You do not need to be a leading economist to realise that the small business landscape is likely to remain lame for the foreseeable future. Once the pathway back to a normal world is a reality and any remaining government help ends, business owners will be rebuilding and looking to the future. I suspect, however, that the majority of these businesses will not find the path forward as smooth as they might hope.

An uncertain future

Since my last article, I have received more prospecting phone calls from lenders than ever before. The reason is twofold. Firstly, the volume of business opportunities is at an all-time low. Secondly, they are keen to remind me of their raison d’être with the hope that once the lead tap is turned back on, they will be at the forefront of my mind. Of course, this is a standard canvasing process that you would expect from those lenders that need feeding. Based on the number of individuals who have been posting about their career movements on LinkedIn and the realisation than some lenders will either cease trading, merge or sell up, it does appear that many remain uncertain about their future.

Following my recent conversations and presence in various lender webinars, I have

“What are the options for lending in the future going to be?”

yet to be convinced that anyone has any real understanding for what our marketplace will look like over the next 12 months and beyond. The government has said that the UK economy is expected to trend upwards from the middle of next year – but on what intelligence is that assumption based?

The profound damage that has been caused to the UK’s backbone will take many years to repair, and a key part of the process is going to be providing access to finance that is fit for purpose, innovative and risk tolerant.

During various catch-up calls with my contemporaries, the conversations follow a familiar lender focus with regards to the extraordinary reasons given for a decline. How would you react if a lender offered a well-established and viable business £75,000 payable over 12 months at a cost of 3.7% per month, but then declined a CBILS application over five years because of affordability concerns? Or if a lender declined a CBILS application because the company had made modest losses for the first two months following lockdown when, quite simply, they should have been underwritten on the figures filed from the previous year?

We also have a business sat on an order book worth about £28m that no asset finance provider will support because the sector has been deemed high risk throughout the various lockdown measures.

This is not an attempt to slay those that have their hands tied in the decision-making process, but simply a snapshot of the current turmoil that many believe will continue, to the detriment of those businesses that warrant the chance to rebuild and press on.

Open for business?

The list of lenders telling the market they are open for business is just an illusion. It’s simply a case of smoke and mirrors. When – if ever – will they genuinely be open again? After Easter? When the pubs reopen again? When it is “safe” to do so? When? Yes, we are a resilient nation, and the majority of business owners will never throw in the towel. But when faced with a negative attitude to lend, what are their options?

Currently, unless a business can meet with a higher-than-normal credit appetite, or is unfazed by high rates and shortened repayment terms, there’s little hope.

In a previous article I posed the question, “What are the options for lending in the future going to be?” No-one has yet given me a definitive answer.

Fast forward to today and it is the same smoke, just different mirrors. A few lenders have said they are willing take an old-school approach to underwriting, but the growth and investment into fintech organisations remains a concerning factor, especially for the thousands of businesses that are likely to fall foul of a labyrinth of algorithms and either be declined or matched with a lender that is not best-fit.

As intermediaries, we remain on the frontline, dealing with all the emotion and fallout of the pandemic. We know only too well that without the correct economic physiotherapy and access to the capital needed, the country’s backbone will not recover, and the majority of small businesses will be unable to move forward.

David Grosse, Managing Director,


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