Since the initial lockdown back in March 2020, banks understandably have prioritised their efforts in supporting existing customers. As we now return to a national lockdown, many businesses will understandably be concerned about their immediate cash flow.

Understanding what your funding requirements are, early engagement with your lender where appropriate and giving consideration to the funding opportunities available in the wider debt market are essential components of effective business planning.  

As lending portfolios stabilise, banks are are once again starting to consider new lending opportunities. However, lending criteria is more stringent with lenders focusing their attention on those businesses with strong, robust cash flows and balance sheets.

The deadline for the Government-backed loan schemes have been extended giving businesses until 31 March 2021 to access the Bounce Back Loan Scheme, the Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme. Those who have already received a loan can apply for a top up, if they’ve not already reached the maximum loan amount. And with favourable rates and conditions they are a good option to consider as part of your cash flow planning.   

Those businesses that have performed strongly throughout the pandemic have an excellent opportunity to consider refinancing or raising new debt facilities on competitive terms to support their growth strategy. 

Planning for discussions with debt providers

For those businesses impacted by the pandemic, it is important to review their debt obligations and understand the implications repayment of these will have for future cash flow. Management need to assess whether there will be sufficient cash headroom to support day to day business requirements and, if not, identify what the borrowing requirement is and begin to have discussions with lenders as soon as possible.   

Whether a business is performing well or going through a challenging time as a result of the pandemic, it is essential that management teams prepare thoroughly ahead of any conversations with lenders in order to maximise the outcome of those discussions. This will include demonstrating that they have undertaken a thorough assessment of their business, as documented in a business plan, which details the following: 

• the impact of COVID-19 on the business; 
• the actions management have taken to mitigate business risk; 
• the strategy of the business over the short to medium term; 
• the opportunities facing the business; and 
• financial forecasts, highlighting the borrowing requirement and what the funds are to be used for. 

The debt funding market is more fragmented than ever, with a significant range of options available to borrowers looking to raise finance. For a number of years now, high street lenders have been faced with increasing competition from challenger banks and debt funds and, with credit appetite from the mainstream banks focused on stronger businesses, it is likely that an increasing number of businesses will have to look towards alternative lenders to support their debt requirements. 

How we can help

Through early engagement, the Corporate Finance team at Johnston Carmichael can provide support in business planning, assessing funding options and recommending how to move forward with lenders. We will also help you consider the wider funding market, identify the right debt solutions for the business and, by running a competitive process with lenders, help your business secure the most appropriate and competitive debt facilities. 

Get in touch

If you would like to discuss this further, please don’t hesitate to get in touch with myself, a member of our Corporate Finance team or your usual Johnston Carmichael adviser.