WILL BREXIT IMPACT ON BANK LENDING?

Even if it’s business as usual the day after the EU Referendum, SMEs across the UK should be preparing themselves in the event of a Brexit. Making sure that cash flow is protected and finances are available is just one area businesses should be contemplating in the coming weeks.

There has been much written and ranted about in the last couple of months in relation to what a Brexit means for businesses in the UK. If you believe the doom-mongers, we could be heading for financial meltdown after the 23rd June with many of us going to the wall. The UK will be a ghost town and unemployment will be at a catastrophic high.

Alternatively, UK business could suddenly be released from our legislative shackles and companies across the country will begin to thrive and bloom without all those constricting EU directives. Businesses will grow, banks will lend, everyone will prosper.

The impact of a possible Brexit, as most of us have found, is becoming increasingly difficult to gauge.

The chances are that it will be somewhere between a new utopia and a potential catastrophe. That will mean there is a short term hiatus where options such as investment and lending may be restricted for a time. It will be an inconvenient though not life threatening period for the majority of businesses.

But with recent news that some banks have introduced ‘Brexit clauses’ into some of their more recent loans (essentially stating that they can increase interest rates if we pull out of the EU) this is still an unwelcome moment of uncertainty for the UK.

For businesses that depend on maintaining a healthy cash flow, the amount of money available for lending to businesses could be interrupted, at least in the short term, after a Brexit. Even before the referendum vote takes place, the conversations surrounding what happens post Brexit are beginning to have an impact. Many SMEs are cutting back on their possible investment in Europe and even delaying new projects until after the Brexit or Bremain dust settles.

Accessing financing during this period of uncertainty is an important issue for SMEs. The trouble, of course, is that businesses still need to be doing business whatever the geopolitical landscape. Ensuring that suitable finance is on the table, particularly over the next few months where bank lending could be more uncertain, is vital for SMEs as well as larger corporations.

Opting for a boutique style finance provision outside of normal banking could well be the best and safest option for many businesses. At best it provides a second line of defence should conditions become less favourable after a Brexit.

At PFC we work with a panel of over 30 funders who can provide the kind of financial support that businesses need in times of uncertainty, helping organisations to weather what some are already calling the ‘referendum storm’. That includes asset finance and commercial loans at competitive rates which can be provided to help maintain cash flow, allowing businesses to continue to function effectively should bank lending stall or become more difficult to access. You may not need it come the 24th June, but having the option there can make all the difference to your future success.