Blogs/Vlogs

Catching the ‘growth wave’ on a sea of credit

1 May 2018

Corporate Finance Director Rob Starr discusses issues raised at our recent Directors’ Forum event on the theme of Financing Growth.

There are some concerns that those ships merrily sailing on a ‘sea of credit’ searching for lucrative treasure islands that offer greater riches could become top heavy, laden with debt and poor rigging, and will simply topple over when navigating through more choppy waters ahead. Just like Henry VIII’s Mary Rose!

The market is seeing higher deal prices, leading to greater leverage and debt multiples, combined with favourable headroom and credit terms with similarities to the heady-days pre the financial crash. There are those sitting high-up in the crow’s nest on the lookout for signs of the sea retreating, and the onslaught of a tsunami with a tidal wave of defaults having a devastating effect.

However, the seascape since the storm clouds of 2008 has changed considerably and there is probably no better time to seek the right wind and tide needed, to fill your sails and propel your business forwards.

The ability to find funding sources for growth has perhaps never been better. The mixture of high street banks, challenger banks, peer-to-peer lending, crowdfunding (whether you ‘love them or hate them’) along with a thriving private equity and venture capital community are part of the story.

Low interests on other asset classes combined with favourable tax incentives and government-backed funding initiatives have created strong liquidity. Moreover, the restructuring of the banking market, the widespread adoption of Fintech and new innovative digital platforms have opened up the sector providing easier access and customer options. Finally, London maintaining its place as a leading global financial centre permeates expertise that spreads across the regions. All the above have contributed to creating a dynamic market which is still undergoing significant change.

SMEs that would typically struggle to raise funds and would simply be ignored as too complex and outside of scope, can find lenders that are more tuned into their specific risks, type and size of business. This is not just with challenger banks or new lending platforms, even the traditional banks are finding niches where they can better serve SME business needs.

Clearly the more vanilla the business, the better terms and rates you will achieve, but riskier profiles are attractive to those that specialise and understand the stage a business is at, and can assess your creditworthiness in context of the business and market you operate in. Whether you require £10k or £100m there are options available.

At the recent UHY Hacker Young Directors’ Forum on financing growth, it raised a lively debate, but the consensus from the panel was that whatever unforeseen stormy waters may arise, the fundamentals remain the same. In essence, you are backing the management team. Weaker and poorly led businesses can falter at any time even if they were once a magnificent flag ship.

The forum panel consisted of Alex Price from N+1 Singer, Richard Whitehouse from Sancus Finance, Chris Rees from NatWest, Torben Luth from JZ International and Andrew Millington and Rob Starr from the UHY corporate finance team.

If you would like to discuss growth options or are considering an equity release or MBO/MBI for your business, then please contact Rob Starr or Andrew Millington  or fill out our contact form here.

Let's talk! Send an enquiry to your local UHY expert.