Bank lending
In this market debt funding is scarce and expensive. Relationships are all-important. Now is not the time to avoid the bank says Baker Tilly’s Rob Donaldson. “You should actually take the time to make sure the bank understands your business,” he advises. It is now well understood that the banks are unlikely to be as flexible as before. “If a breach of covenant occurs, banks are likely to react by charging a fee and, in the extreme, reducing facilities. It is taking a long time to fix funding problems,” he adds.
Equally, companies should not assume that facilities will be renewed. It pays to have contingency plans. If an existing bank does change terms, owners would be wise to not expect the grass to be greener elsewhere. “I’ve seen lots of businesses who have gotten fed up with funders and thrown the offer back in their face only to find there’s no ready alternative.”
That said, there are lenders beyond the high street, with Santander, KBC, Co-Op, Handelsbanken, Investec, Clydesdale and Centric Commercial Finance all offering alternatives.
Related thinking
- The age of equity
With bank lending dramatically reduced, now may be the time to consider alternatives. The re-emergence of private equity could hold the key to mid-market companies' funding requirements.
- Rich pickings
In this battered economy, many companies are struggling simple to survive. But for stronger cash-rich businesses with vision, now is the time to start the search for potential acquisition targets.
- No time to panic
Companies faced with a lack of credit over the next 18 months need to keep their heads and find ways to survive.