Finance: It’s not like it used to be!

I was reminiscing with a client recently about how different it used to be trying to raise finance from the bank, prior to the credit crunch.

Just over ten years ago our business moved office and had a lot of expenditure upgrading the premises, which put a strain on our cashflow. To help tide us over a quick email to our relationship manager outlining the financial projections of the move and the impact on our cashflow forecast moving forward, followed by a lunch, was all that it took to secure a 12-month loan, at a very reasonable interest rate and low arrangement fee.

The next day the paperwork was signed without any need for endless security, and by the end of the week the money was in the bank. I can always remember the manager’s words at the end of lunch. “Colin, you won’t let me down will you?”  Well no, I didn't let him down, and the loan was paid off in full over the 12 months as forecast.

How things have changed since the credit crunch! I know that banks are constantly saying they are open for business, but I cannot imagine a loan being granted at such short notice these days on the same terms.

One thing that still remains constant though, is the need for robust forecasts, both profit & loss and cashflow, that allow business owners to plan for the future.

These forecasts are vital if a business is looking to invest in new products or services, and if a bank is going to grant a loan they will want to ‘stress test’ a company to ensure that it can afford the repayments, as well as having necessary security in place.

Having a Finance Director within your business, whether full- or part-time, who is adept at putting these forecasts together, will help your company to gain considerable credibility with the banks and help secure funding. I believe this so strongly that I now work part-time with small businesses as an Associate at South West FD (SWFD), in addition to my long-standing role as Chairman and Finance Director within my own business, Target PR.

As the UK hopefully continues to recover there is likely to be more borrowing requirement to boost the economy. So let me unashamedly plug SWFD, which has a number of Associates who can give businesses financial credibility by putting in place budgets, forecasts and cashflow statements that will ensure you will be in the perfect position to approach either a bank, or external investor, to raise funds and move your business forward.

Colin Spencer

Chairman

Is UK plc really on the road to recovery?

It may have been a long time coming but the latest economic indicators certainly suggest that there are genuine green shoots and the start of a recovery. 

We have seen GDP grow in the first two quarters of 2013, reduced unemployment, rising house prices, increased new car sales and even a sense of optimism replacing the gloom and doom of national commentators!

People seem to be generally happier this year buoyed by the sunny summer, royal baby and the continued British sporting success following on from the Olympics in 2012. Victories for Justin Rose, The Lions, Andy Murray, Chris Frome and England’s cricketers thrashing the Australians have certainly added to the feel good factor; even England’s much maligned footballers got in on the act beating Scotland, but tougher challenges lie ahead for them!

So how is the perceived economic recovery affecting small businesses, who are the life blood of the UK economy? Well as a small business owner myself, I can say that there certainly appear to be more opportunities presenting themselves, although the market place remains very competitive.

Over the last few weeks, I’ve had a number of conversations with professional advisors from banks, lawyers and accountants and there is a general consensus that a lot of the companies they look after are now hoping to move their businesses forward, and away from the survival mode they’ve been in for the last few years.  

However, expansion and growth gives fresh challenges to businesses, as history tells us that more businesses start going bust as we leave a recession because it’s easy to overtrade and run out of cash. This emphasises the need to have good solid operational and financial controls and procedures in place, making sure that any growth is controlled and any cash requirements flagged up well in advance.

So what do the next few years hold in store for UK plc? The announcement from the Bank of England that interest rates are going to be kept at a low rate for the foreseeable future gives a great sense of security for business. Hopefully this, allied to the improved economic figures, will give businesses more confidence to start spending money on projects they have put on hold, which will then filter through to the SME market and help boost the economy further.

It has certainly been a long hard road to recovery but I remain optimistic that the current signs show a recovery is underway. A nice steady upwards growth curve over the next few years for UK plc will do nicely, thank you very much! 

Colin Spencer

Chairman

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