Funding business growth in the current economic climate – by Harriet Gibbs

Harriet Gibbs, Business Development Director for Yorkshire and the North East, provides guidance on how SMEs can fund growth in a period of economic uncertainty.

You can contact Harriet here.

SMEs throughout the North East are in a challenging economic climate following a tough year of rising inflation, interest rates and political uncertainty.

In spite of this, and through speaking with SMEs, finance brokers and other intermediaries across the region, we’re seeing a relatively buoyant market, with many businesses viewing the next 12 months with a higher degree of confidence.

For those eyeing growth, many require finance. Whether it’s a manufacturing business at the forefront of innovation or a building firm exploring property development opportunities in the year ahead, it can be a minefield accessing funding. The commercial finance market has experienced a significant slowdown due to increased nervousness and uncertainty, tightening of lending criteria and borrowing from banks becoming increasingly difficult.

One example of a North East business that overcame this challenge was Zebra Leisure Lease, a Gateshead-based property developer that was looking to drive growth and diversify into the assisted-living space. The company, like many others in the current climate, had found it challenging to secure short-term commercial finance within a tight timeframe via traditional high street banks and other lenders.

Zebra Leisure Lease specialises in purchasing homes via auctions, to then refurbish them to a bespoke standard for letting purposes and housing scheme requirements across the region. Due to the fast-paced nature of property auction deals and the need to complete purchases within 28 days, it needed an agile and responsive finance solution that could meet these cash flow pressures and overcome barriers to growth.

We provided a six-figure facility to enable the business to expand its 33-strong residential and commercial property portfolio, primarily across South Tyneside. Now boosted by the cash injection, the business is on course to expand its property portfolio by 48% and double revenue in the next few months.

The property market in the North East is clearly showing signs of optimism if businesses like Zebra Leisure Lease are any indication. For example, the demand for rental properties remains high, especially amongst investors and landlords with large residential property portfolios who are looking at long-term development opportunities in response to increasing rental prices. We’ve seen this has led to a growing demand for them to seek working capital ‘hunting pots’, which enable them to snap-up properties as soon as they hit the market, rather than missing opportunities due to cashflow constraints.

We’re certainly seeing that it’s not all bleak for businesses looking to fund growth, particularly as we enter an era of customer focused lending and being in a position where alternative finance offers greater liquidity and flexibility.

Those businesses planning to expand across all sectors in the year ahead will need specialist advice and expertise from brokers, advisors and lenders, who can work collaboratively to help the company secure the right funding and provide ongoing support when the working facility is in place. They will also need to prepare their business so they can gear up for borrowing and be in a position to give the broker and lender confidence.

For SMEs in the region that are looking to borrow, we’d always advise that they build a business growth plan, financial forecasts and assemble other essential data from the outset. It is important they estimate their expected cash flow requirements and anticipate any potential financial hurdles over the coming year so they can have an open and honest dialogue with both broker and lender.

Being transparent is key, especially for businesses that need short term, flexible working capital to bring new ideas or growth plans to market at speed. Being clear about the amount and timeframe of any funding requirements will prevent a company securing the wrong finance solution and therefore further stifle their growth ambitions.

Despite the economic uncertainly in the market and increased hurdles to borrowing, we’re seeing a growing optimism amongst SMEs in the North East and belief they can access the necessary funding to unlock growth opportunities in the year ahead. This can only bode well for the region’s economy and turn a corner for many businesses and sectors looking to expand within it.

This article was featured on Insider Media. You can read it here.