Business lending landscape and options for HLT businesses

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By Darcie Rae, Corporate Finance Senior Manager, and Stephen Dinsmore, Corporate Finance Manager - Fundraising and Finance

Following the success of the various Government-backed lending schemes to assist businesses through the Coronavirus pandemic, the lending landscape has changed somewhat, with lenders very much in a period of reflection, rather than actively chasing new opportunities.  

This is understandable, with record amounts of funds distributed to assist businesses to survive, or thrive, during the pandemic. There were £75 billion of loans made to 1.6 million businesses in the last year alone. There is general uncertainty around the level of these funds which will be immediately repaid if unused, or which may go into default.  

Increased levels of debt as well as other measures taken during the pandemic, for example, deferral of HMRC liabilities, will make it increasingly difficult for businesses to obtain borrowing from mainstream lenders. This is primarily due to the debt serviceability requirements and lending policies of these lenders, which are generally consistent with pre-pandemic policies. 

There has also been a tightening of appetite across all lenders towards certain sectors, including the hospitality, leisure and tourism sector, which was worst hit by the pandemic.  

There is a belief that within more industrial sectors there will be an increased demand for more structured funding facilities such as Trade Finance and Invoice Finance to assist businesses with working capital requirements. Funders will look at these facilities more favourably as there is greater security to the lender than unsecured or unstructured facilities such as overdrafts and business loans. Given that these types of debt facilities aren’t available to most areas of the hospitality, leisure and tourism sector, the funding landscape is even more challenging for those businesses. 

With few options remaining, the alternative debt market and its ever-growing number of lenders is looking more and more like the only option available for the sector. Built on the ability to provide funding that the mainstream banks are unable or unwilling to provide, this can mean that the cost to access finance is increased.  

Importance of Management Information  

Businesses that produce regular Management Information and forecasts can identify any potential issues early and look to address these shortfalls as soon as possible. Issues such as margin erosion, staffing levels or cash shortfalls can only be highlighted with robust financial reporting. By identifying issues as early as possible, businesses have a greater number of measures available to address these issues and put plans in place.  

This Management Information is a vital tool when looking to access finance as it shows that businesses have stringent internal controls as well as being able to easily provide up to date, and reliable, financial information, rather than waiting until the year-end accounts. Forecasting is also another powerful tool for giving you (and the banks) piece of mind that the business can comfortably service the interest and repayments of any debt you are looking to secure. 

Your accountant will be able to work with you to put in place appropriate Management Information on a timely basis and work with you to maximise the effectiveness of this to impact positive changes to the business that will drive recovery as a result.  


Click to download a copy of our Business Funding Guide or to speak to one of our team about how we can help you improve your Management Information

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The deadline for June 2021 claims is 14 July 2021. If you require our JRS team to submit your claims please send them to jrs@armstrongwatson.co.uk by 9 July 2021. For details on the changes to the scheme visit our CJRS page.