If media reports are to be believed, it appears that the government is gradually becoming aware that their various solutions to kick-start the bank lending haven’t actually worked yet, and therefore the unusual step of “quantitative easing” by the Bank of England, is likely to commence in a couple of weeks. This is the equivalent of the country increasing the supply of money into the market, and before the technological age, actually involved the printing of more bank notes.As a firm, we are definitely finding that finance facilities are tougher to obtain for our SME clients, a view that is replicated around our colleague firms around the UK in The Corporate Finance Network. Besides the high street banks, the independent finance companies in the Asset Based Lending market are also now starting to be affected. We’ve received news this month that Potential Finance have gone into administration and GE Commercial Finance have pulled out of the small business lending market. However there are still plenty of funders in the SME market who are actively lending, but the key is to be prepared and approach the right lender for the type of facility you require.
Several banks are now focusing on their customers’ adherence to the covenants that were put in place when facilities were agreed. Terms such as providing management accounts to the bank may not have been complied with precisely in the past, and has probably not been raised by the bank as a matter of concern before now, but now this is one such term that the bank could be focusing on when evaluating their exposure to your lending facilities. We have seen that some customers’ facilities are being reduced, or their interest rates are being increased.
So the message is to be prepared. Dig out your terms and conditions of overdraft and finance facilities, and if you have any potential cause for concern, contact us several months before your scheduled annual renewal. We can review your situation with you, and advise on any action that we think you should be taking, which will hopefully put you in a position of control, and allow you to concentrate on running your business.