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Five Things UK SMEs Should Know About Raising Corporate Finance

20th September 2022
Islay Robinson GROUP CEO

Islay Robinson

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Five Things UK SMEs Should Know About Raising Corporate Finance
GROUP CEO

Islay Robinson

Corporate finance is the ultimate tool for businesses: you can use it to fuel growth, manage cash flow, solve problems or cover short-term revenue gaps. While there's lots of speculation and trepidation about what's next for the global economy, businesses' ability to raise debt won't simply disappear. Corporate finance providers remain ready to lend – particularly for small and medium enterprises (SMEs) and family-owned businesses. Many lenders recognise these companies' quality and high potential and will support them by offering competitive finance. 

Pockets of growth 

There is near-constant discussion and press around economic volatility and the potential of a global recession. While there are almost certainly economic headwinds ahead, figures show that many UK businesses are still experiencing growth and increased revenue. According to Barclay's small business barometer, 55% of the UK's SMEs saw revenue increases in Q2, compared to the same period in 2021. 

'We're seeing that there are still enormous pockets of growth for UK businesses, especially from SMEs,' says Scott Monks, Head of Corporate Finance. 'To weather the pandemic, SMEs, in particular, had to be very adaptable and strategic. Many of them now find themselves primed for growth at the tail end of the pandemic, despite a potential economic slowdown. Those that can grow are looking to corporate finance to facilitate potential growth to scale and capture opportunities,' he adds. 

Corporate finance is a much-needed tool to leverage potential growth. You'll use different types of corporate finance in different scenarios, depending on what you want to achieve and the best way to secure the loan. Business bridging loans, stock finance and invoice finance are some of the most common, and some of the overarching benefits of corporate finance include:

  • Create the liquidity your business needs to invest (in infrastructure, machinery, operations, workforce real estate) that will support the overall growth of your business
  • Raise finance, so you don't have to use working capital to pay significant liabilities 
  • Use a loan to facilitate cash flow management
  • Free up capital from assets, stock or unpaid invoices to help you scale

The rise of non-bank lending for SMEs

Even when they have a fantastic basis for borrowing and can showcase that they are quality and financially stable businesses (often with growth potential), finance is still challenging for SMEs. According to fintech firm Sonovate, more than 25% of businesses say banks won't lend to them and have lending policies that haven’t adapted to modern business needs.

The natural assumption when a bank turns your business down for lending is to assume that your business can't access finance at all. While some banks are brilliant SME creditors, others have become far more discerning in the type of business they will lend to, preferring to offer substantial loans or only lending to big companies. This can leave SMEs struggling to raise finance. 

Seeing this as an opportunity, many non-bank and alternative lenders have stepped up to support SMEs access finance. These lenders are consummate professionals, regulated and are very credible. The only difference is that they are non-bank lenders and aren't always as well-known as their banking counterparts, making it challenging for SMEs looking for financing to connect with them. It’s when an alternative or less well-known lender is the right creditor for you, that we come into our own, broking the deal quickly and negotiating the agreement, so the package is personalised and you have the best rates available. Especially when it comes to non-bank lending, lender access is everything. We will know which non-bank lenders will be able to let you borrow, who will offer the most competitive rates and how to present your case to them, and we have access to hundreds of lenders who can execute these deals.

Corporate finance for SMEs: plenty of options

Corporate finance is increasingly sophisticated, and there are more and more products available on the market. Lending products include:

  • Stock loans
  • Entrepreneur finance 
  • Working capital finance
  • Commercial property finance
  • VAT finance, invoice finance
  • Business bridge loans  
  • Trade finance
  • Corporation tax loans
  • Personal guarantee finance 

Some types of corporate finance are ideal if you need to overcome short-term and non-critical dips in revenue – particularly in the context of economic volatility, inflation and staffing challenges. Others are a great fit if you need to capture growth or scale your business. Finally, some products will be a perfect fit if you need to raise debt to create a solution for a specific challenge: you want to buy out a business partner, protect your personal assets if you are a business owner guaranteeing a loan, or manage cash flow when you receive a significant VAT invoice or personal income tax liability. Provided your business has a solid credit and trading history and is in good financial shape, lending is usually an option – even if your business needs capital to cover lower-than-usual income or to support the business ride out economic pressures. It's not always obvious what corporate finance option you should choose, and you don't have to know – corporate finance is a specialisation in its own right. We can help you access the best deals and deliver the finance solution you want or need – whatever the scenario. 

Lenders that understand your business and your goals

Where banks are becoming more discerning about the SMEs they will lend to, corporates are also becoming more reflective about who they can borrow from. 'Corporate finance has become more nuanced in the past few years, and borrowers are also coming to the table with requirements that extend beyond simply raising debt. Borrowers don't want to work with a lender who doesn't understand their needs, their business, who can't move quickly, or who have an out-of-date approach to lending. Only the best-quality borrowers can pick and choose lenders on this basis, but increasingly there are enough of them that they can actually make these demands,' says Scott. Lenders are increasingly moving to meet this demand and want to add value beyond the most competitive rates. Alternative lenders, in particular, can be front-runners in this space, although some banks also offer great added value. Again, lender access is everything here. Depending on your business or industry, sometimes it will be beneficial to borrow from a lender specialising in a specific sector or type of lending. In other cases, your business may benefit from a lender that focuses on lending to companies of a particular size or offers niche or specialist lending products, depending on your needs. 

Rising costs of living

We can't talk about corporate finance without touching on the rising costs of living, which are a major consideration for any business. Nearly 75% of UK SMEs report that they are 'very' worried about rising business costs due to inflation, which might also need to be balanced with potential drops in revenue if consumers tighten their belts.  

Working capital loans are ideal if you have a solid business that undergoes a short-term dip in revenue, covering your operating expenses, including in cases where you experience a low revenue spell. 

Key benefits of working capital loans include:

  • Facilitate or improve cash flow management
  • Fund operations if your business navigates non-critical dips in revenue
  • Quick to arrange and large loans available
  • Lenders are open to financing, including if you operate in a niche or unusual industry, or have a small but lucrative client base

Contact Enness

Enness works with corporates of all sizes to broker high-value finance. Get in touch if we can explain your options, the financing products available and what lending solutions we see for you.