Support is the key to unlocking

The cautious unlocking that has seen people heading to beer gardens for a pint and making long-needed appointments with hairdressers offers a glimmer of hope for hard-hit businesses.

April saw the reopening of non-essential retail, gyms, hairdressers and outdoor hospitality. It also saw the opening of the governments £75bn Covid Recovery Loan Scheme seen as a vital tool in helping businesses to unlock.

The new programme aims to give UK businesses access to financial support as they recover and grow following the pandemic.

Companies can apply for loans of between £25,000 and £10m, with the government taking on 80 per cent of the default risk. Invoice and asset finance is available from £1,000.

The loans are available through a diverse network of accredited commercial lenders and the scheme will run until December 31.

Once received, the cash can be used for any legitimate business purpose, including managing cashflow, growth and investment.

The programme got underway amid warnings that cashflow is going to be a major issue for many companies as they start their road to recovery and look to take advantage of a potential £50bn boom in consumer spending.

Across Lancashire there are several alternative options open to businesses looking to raise finance

The challenge is explained by Nicola Clark, North West head of restructuring at accountancy firm Azets. She says: Unfortunately moving from being effectively mothballed to full-on trading can bring its own suite of financial problems, in particular a lack of working capital, and it is important that business owners are aware of the risks.

Businesses, in particular the hospitality, retail and leisure industries will have to invest in stock, staff, systems and processes.

During lockdown, many businesses will have had to finance property maintenance costs such as heating, lighting, insurance and inspections. Furlough will soon finish, and any loans or grants will likely be depleted.

“In addition, preparing to start trading again from effectively a standing start will require considerable investment for many businesses and although some will be in the fortunate position that they have cash in the bank, others will be faced with the problem of financing the business opportunities that will emerge during the coming months.

Government cash has helped businesses to survive, but the next major challenge is that businesses will also need cash to trade and survive the stresses of reopening.

She urges Lancashire business owners to plan ahead, avoid trying to operate at full capacity from day one and to ensure there is sufficient cash on hand to finance daily operations.

She adds: “Hospitality, retail and staycation providers should benefit from prompt cash payments, but other business sectors could find it takes weeks and months to be paid.

While a consumer spending boom is highly likely it may not be as large or as swift as has been suggested. We would encourage business owners to take a careful approach to reopening, ensure they have updated their business plan and have a clear view of where the cash will be coming from, and when.

The British Business Bank will administer the new recovery loan scheme on behalf of the government. It has already played its part in the response to the pandemic, administering earlier support programmes, including the Coronavirus Business Interruption Loan Scheme (CBILS).

Jamie Grimshaw, investment executive at fund management company FW Capital, says that scheme has been a success and adds: It is clear from the appetite for the CBILS that recovery is at the front of everyone’s minds.
We saw a surge in applications as the deadline approached at the end of March, with businesses keen to take advantage of the favourable terms.

We have so far invested over £35m into Northern businesses through CBILS, and we are still working through applications.

It is certain the demand for the Recovery Loan Scheme will be just as strong.

Peter Kelly, corporate finance director at Lancashire accountants PM+M, points out there are “subtle differences” between CBILS and this latest scheme.

He says: “While CBILS was more about providing funding to support businesses through a very tough trading period, whether it be via loans or working capital, this scheme is about recovery and moving forward.

“Facilities will be geared towards rebuilding, growth, and future investment, rather than maintaining, and funders will potentially have more leverage as a result over which businesses they ultimately support with this scheme.”

He adds: There is no doubt that businesses in Lancashire have suffered due to the pandemic, some sectors more so than others.

However, we have seen them demonstrate a resilience, resourcefulness and adaptability which means that many are in a good place to move forward as lockdown conditions continue to ease and the economy reopens.

Peter also points out that other funding support is available: Across Lancashire there are several alternative options open to businesses looking to raise finance, he explains.

Worth investigating is the Northern Powerhouse Investment Fund, which is administered by The Growth Company, FW Capital, and Maven in Lancashire, depending upon the amount required, and whether a business is looking at raising debt or equity.

There is also the Rosebud Loan Fund which is providing loans up to £300,000 for Lancashire businesses. A good place to start might be Boost Business Lancashire, which can direct business owners to these and other funding that is available.

Jamie Grimshaw adds that FW Capital is currently offering funding of £100,000 to £750,000 from The Northern Powerhouse Investment Fund to businesses across Lancashire looking for funding for a variety of purposes.

He adds: This could include working capital, investment in new staff, the purchase of new machinery or to move premises.”

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