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Borrowing in more challenging times

The lending environment has changed dramatically in the last year and requests for funding are increasingly struggling to comply with lenders policies. The main problem is the increase in borrowing costs: the long period of ultra-low interest rates came to an end with a series of base rate increases in 2022. This has continued into 2023 with the latest rise to 4.5% in May – up from 0.1% only 15 months earlier.

The cost of borrowing is now at its highest since 2008 and the stress tests being applied are assuming that this will not ease in the near future.

Another risk factor being applied by lenders is sector specific: any business which is consumer led will find a restricted appetite to lend. We recently dealt with a wholesaler where its high street lender initially responded favourably to the funding request but this was reduced to and then withdrawn completely with the bank citing vulnerability to consumer demand as the reason.

Alternative funders

We have conversations with banks, for example about fixing rates on all or part of the loan. This can tip the balance if the concerns are not too deep.

There is also a wide range of non high street lenders who can be more creative. For example offering longer term interest only periods or providing longer repayment profiles to ease cashflow.

How can we help?

Our team includes people with experience both within banks and as advisers. We can, if necessary, also provide turnaround and restructuring advice. This can then facilitate lender discussions by addressing underlying issues of concern.

We can maximise the chances of success by, for example:

  • Focussing business plans and projections to address lender concerns such as security, profitability and cash availability
  • Considering the structure of the funding request in terms of period and fixed/flexible rates
  • Applying our detailed knowledge of the risk appetites of lenders

So, if you need funding and are encountering difficulty in getting it, call one of our specialists.

FEATURING: Lucinda Coleman
Lucinda is a partner in PKF Francis Clark’s Business Recovery team, she is a Chartered Accountant and a Licensed Insolvency Practitioner with the ICAEW (Institute… read more
FEATURING: Alison Trant
Alison has gained over 20 years’ commercial banking experience since joining the Bank of Scotland graduate programme in her home city of Glasgow in 2001.… read more
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