Growing businesses demand fuel – finance options for Covid-19 stricken businesses

Ultimately, for a business to exhibit growth, it must be fuelled with steady investment to shield against risk and fund resources, equipment, and the recruitment of new talent. Considering the new pressures put forward by the coronavirus pandemic, what finance options are available for Covid-19 stricken businesses with their sights set on sustaining a strong company growth track record?

The lending appetite of the UK market

Businesses at all stages of their life require fuel, whether this may be in the form of a cash injection, commercial finance or a government grant. As businesses hard hit by the pandemic strive to return to their financial position pre-Covid-19, many will require a cash boost to get back on track.

To determine the most suitable course of action, business owners must calculate how much they can realistically afford to repay while continuing to make Covid-19 loan repayments, such as a BBL (Bounce Back Loan) or CBIL (Coronavirus Business Interruption Loan).

How the funds will be spent will also determine the avenue that the business must pursue, such as asset finance to purchase industrial machinery, invoice finance to release cash from invoices or a bridging loan to tie the business over while waiting to enter a new finance agreement.

The key to securing finance in current Covid-19 conditions is being able to demonstrate that your business is viable and in a robust financial position to take on more debt and afford repayments.

A survey conducted by RSM, on the impact of coronavirus on the lending appetite of the UK market found that although economic uncertainty upturned the lending market, lenders are on hand to support businesses with their growth plans.

- Despite the impact of coronavirus, the UK lending market, including High Street clearing banks, specialist banks, asset-based lenders and private debt funds, are supportive of existing clients and open for business to corporates looking to borrow funds
- Cash flow lenders are providing innovative solutions to provide working capital to their clients
- The lending market is ready to lend new funds to support mergers and acquisitions (M&A) and other event driven transactions
- Lenders remain supportive of their clients and both ABLs and cash flow lenders are providing innovative solutions to provide working capital to their clients
- Although lenders continue to support businesses, almost all respondents expect that corporate insolvencies will increase. Real Business Rescue’s Business Distress Index shows that the first dip in the number of UK businesses in significant financial distress since the pandemic was in the second quarter of 2021

On the whole, although the pandemic increased the likelihood of defaults and bad debt, lenders were at the forefront of supporting businesses throughout the pandemic by providing a gateway to government-backed lending schemes, and continue to be.

Finance options for Covid-19 hit businesses

As businesses come to terms with the road to recovery, we take a brief look at commercial finance options for businesses, such as:
- Asset finance – Using company assets as security to seek borrowing against
- Invoice finance – Unlocking money from invoices early to replenish working capital faster. Invoice finance is available in two forms: invoice discounting and invoice factoring, the key difference being retaining the management of credit control in-house or outsourcing
- Bridging loan – A short-term loan to bridge the gap until access to finance is ready
- Business loan – Borrowing from a range of lenders for your desired term and end goal

Company growth can be measured in a host of ways, from the number of new clients that join a business, annual turnover, to marketing reach. Although each business will have its own methodology to measure success, all will require essential cash support to fuel growth.