Brexit may be creating uncertainty and those that can take steps to mitigate the risk may be doing so but what are the other factors that are directly challenging businesses in the South West?
With the pressure on High Street Banks in their annual review to reduce unsecured overdraft levels and switch core debt to term loans businesses are fighting a scarcity of working capital. If you have been overdrawn all or a significant part of the year this could be interpreted as core debt and converted to a loan subject to passing the security and affordability tests.
Bank accounts come under pressure in a number of ways. Negative factors such as falling sales or rising costs can leach cash over a long period and a combination of VAT/Wages plus one other significant event can create a crisis. Even positive factors such as rising sales can be an issue as a business tries to fund the new growth from existing funds whilst waiting to be paid which can create a similar cash pinch point.
Traditionally turning to your Bank Manager was the answer. They knew how your business worked and had the history of how your account had been managed with the authority to grant instant additional working capital within the bank guidelines. We have to recognise that this model has changed for most businesses however what has improved is the access to alternative finance routes either directly or via a Commercial Finance Broker.
Recognising a potential future cash deficit and planning ahead to obtain additional working capital is absolutely key as lending decisions are taken at the point in time of application. Having little current headroom makes an underwriter nervous to advance more. Equally out of date management information and no plan to address negative trends undermines any application.
Presenting the right credit information in the right way at the right time to the right funders is the sure fire way to create some certainty in uncertain times.