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How working capital facilities can help SME’s recover from COVID-19

26-04-2021|Ultimate Finance

The UK’s SMEs have experienced the most volatile trading conditions in most people’s memories. Some sectors have been effectively closed for a year or at least they have been operating on a considerably reduced basis. By contrast, some sectors have enjoyed a boom in demand due to businesses and their employees needing to adjust their business models and working practices.

In 2020 the Office for National Statistics (ONS) confirmed that the UK economy had shrunk significantly with GDP falling by 9.9% due to the Pandemic. In a recent report leading global accountancy firm Deloittes predict a further fall in GDP of 1.7% for the first quarter of 2021 before the economy bounce back in the second half of 2021. The International Monetary Fund has upwardly revised it is forecast growth for the UK’s GDP to 5.3% because of the UK’s successful vaccination programme.

Whilst confidence of a bounce back in the economy is gaining momentum the UK Government has had to employ extraordinary measures to support the economy through a variety of schemes such as job furlough, tax deferrals and rental arrears. The Government also encouraged Banks and other finance companies to keep lending to the UK’s SMEs via the CBIL and BBL schemes.

As we to look towards returning to some level of normality those Government schemes are already starting to taper off. This could have a serious impact upon SMEs. Credit insurer Atradius has predicted that global corporate insolvencies could increase by 26% with the UK being particularly vulnerable due to the depth of the decline in GDP experienced in 2020. However, it is not only companies that may need to restructure that may experience challenges. For those companies that are experiencing a strong growth in demand they risk over-trading if the do not have sufficient financial resources to pay their suppliers on time. Whatever the scenario or situation an SME finds itself in access to working capital is essential.

No matter how small or large a company may be cashflow is the lifeblood of every business. One way to access cashflow is via a working capital facility and depending on each SME’s individual cashflow requirements there are a range of funding solutions that are available. A single, short term requirement may be met via a single (or selective) invoice finance facility.

Where there is an ongoing working capital requirement invoice factoring or invoice discounting may be the most suitable financing structure. For businesses that have a range of assets that could be used to generate working capital the non Asset Based Lending (or Structured Finance) facility may be appropriate.

For those businesses that are having goods manufactured by a third party (whether it be in the UK are overseas) a Trade Finance (or Purchase Order Finance) facility could provide valuable working capital if the manufacturer is requiring full payment before releasing the goods.

With so much choice available in the market professional advice from advisors and introducers is more necessary now than it has ever been, particularly for those businesses seeking funding for the first time or looking to establish the right long-term financing structure.

Here at Ultimate Finance, we have remained committed to supporting the UK’s SMEs throughout the pandemic, we understand that the current environment is still challenging for many business owners.  Despite the prediction of a promising economic upturn to come, navigating the next few months as we come out of national lockdowns, alongside managing any impacts from Brexit, will not be easy for many but our relationship based, solution led approach means we are the right partner for businesses needing assistance with their cashflow. We take the time to talk to you so that we fully understand your requirements, provide the best funding solutions that meets those needs and become your long-term funding partner of choice – don’t just take our word for it though. Check out our industry leading Trustpilot score and see what our clients have to say.

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