Debt needn't be a problem if you get it right

Whether it is the result of the multiple recessions of the last decade, the Covid-19 crisis, or both, businesses seem far more comfortable operating in debt than ever before.

Figures show that in the last 12 months, there has been the same amount of lending to businesses than in the last eight years.

We’ve also seen a raft of government schemes to support hard-pressed companies during the exceptional circumstances created by the pandemic and lockdowns that we’ve faced.

They include the Bounce Back Loan Scheme (BBLS) which was designed to enable businesses to access finance more quickly during the coronavirus outbreak.

Then there was the Recovery Loan Scheme, set up to support access to finance for businesses as they grow and recover from the disruption of the pandemic.

There were early fears that large numbers of businesses might default on their bounce back loans, though recent analysis seems to indicate that only around five to 10 per cent of businesses had missed their bounce back repayments. That sounds like better news for the taxpayer and the Treasury but what of the future? Where will Lancashire’s SMEs get the working capital needed in the post-pandemic world?

They may well find it harder when it comes to traditional sources. That spike in lending that we have witnessed in recent times, plus the state of the economy, is set to make banks even more selective when it comes to who they decide to lend to.

They are more likely to step back and allow alternative funding sources to step forward and carry the risk, as they focus on their larger clients – as well as collecting in what they have lent over the last 18 months.

There will still be money out there, the goal for Lancashire SMEs seeking it is to ensure it is the right kind of funding for them.

So, get the right advice, fully consider all options, challenge the figures and be totally upfront about the health of the business with potential lenders.

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