Welcome to the third post in our 'Building a resilient balance sheet for 2021' series looking at solutions and opportunities for 2021 viewed through the balance sheet. We now move to short term creditors.
Ian Lomas and Chris Duffill of Gateley Vinden’s Corporate Debt Advisory team look at current options, availability and ease of access to funding.
Many funders have participated in the various Government support schemes. Their availability to make further monies available may be impacted as a result. The key, therefore, is to demonstrate you have a viable, well-run business which is worth supporting.
What happens if additional funding is required?
If additional funding is required, the best place to start sourcing this is usually your existing funder. Treat them as a key stakeholder. Proactive engagement is crucial to establish the goodwill and trust necessary to negotiate an extension or additional funding. Ensure you can articulate your vision and business plan, supported by realistic and evidence-based forecasts.
Your existing funder may no longer be right for you, for example, because your business is better suited to specialist funding, or because a lender is reluctant to increase lending into a particular sector.
Ease of access to funding
The good news is that the funding market has changed significantly post 2008, with the establishment of numerous new funders across the market. Long gone are just the options of the four main clearing banks, although in terms of volume they still dominate. There is now a much wider supply of potential funders all looking to grow.
Many of these new funders are specialists looking to focus in certain sectors or into certain segments of the market, where they are offering term loans, asset finance, invoice finance, stock finance, export finance, property-backed facilities or cash flow loans. They often have different attitudes to risk, which is reflected in their pricing.
What happens if you can't approach your existing provider?
If you don’t feel able to approach your existing provider, given there are an array of funders out there, I would recommend you seek professional advice from either a specialist debt advisor, your Solicitor or Accountants.
In our next post, we look at longer-term creditors and whether their economic interests could be maintained whilst converting their debt into flexible equity structures that do not unduly dilute ordinary shareholders.