Identifying opportunities in difficult times – by Nick Smith

There is no escaping how tough a period this is for all businesses, especially SMEs. From inflationary challenges and supply chain issues to strikes and spiralling energy prices, this climate of political and economic uncertainty puts immense strain on companies across all sectors.

The spotlight is on commercial finance to help SMEs navigate their way through this minefield. An injection of finance gives SMEs the certainty to find solutions to challenges and understand when and where to invest. Certainty is critical at a time when the economic situation around us is seemingly out of control.

From a regional perspective, we’re finding that this certainty offered by commercial finance is enabling SMEs to tackle economic challenges head on and identify new revenue streams and opportunities for growth. This has been the case in the Midlands where we’ve recently assisted a Stourbridge-based used car dealership, which took advantage of a £200,000 business finance facility to capitalise on the healthier market conditions experienced in that sector. It has given that dealership the flexibility to purchase and sell more high-end vehicles when they become available. With talk now of recession, it’s often overlooked that new growth opportunities can come out of the most difficult market conditions.

Whether it’s SMEs using finance to unlock these growth streams or cope with pain points such as cash flow issues caused by the current climate, the speed of lending and transparency offered by providers is key.

We’ve provided £5.2m of funding to SMEs in the first year of launching in the Midlands, which is largely down to the speed, simplification and transparency of lending which again provides that certainty in decision-making under pressure. Whoever the lender may be, SMEs recognise the benefits of borrowing if they understand what they get, what it costs them, what happens at the end of the term and their options to repay. This is where both the lender and the intermediary can work together to support the client.

Client by client approach

Each SME has different circumstances (even in the same sector), different trading histories, different customer profiles and a different asset base. There is a place in the market for credit score lending but that is difficult at the moment as there are so many variables. It’s time for traditional underwriting to provide clarity around suitability, purpose, amount, repayment and security as we know these are all things the intermediary needs to consider, to ensure the lender has the full picture.

Security values are moving, costs are all over the place and needs change regularly. A good set of information, a great handle on the lending opportunity and evidence of debt serviceability are the key components to a good file.

Whether it’s the SME, broker or lender, all parties need to be aligned on the finer detail and the purpose of borrowing, if we are to harness the benefits of commercial finance over the difficult months ahead.