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Advice and funding options

Seek advice on your funding

There are lots of sources of information on the types of funding available for businesses in the UK but finding finance that’s suited to your business’ specific needs isn’t always straightforward.

HMRC support

In the budget on 11th March 2020, HM Treasury announced that all businesses will have the option to defer VAT and other tax payments for up to three months, in response to uncertainty related to COVID-19 and EU Exit, in particular.

For up-to-date information, visit the government support website for COVID-19


Often, a struggling business’ bank or existing lender will identify a range of funding options, but in times of uncertainty or change, it can be difficult for businesses to successfully access the finance options needed.

But it’s not all doom and gloom and often the answer lies in different providers and sources of finance to ones you may usually use.

And while new arrangements will typically incur an arrangement fee, they can also provide the peace of mind that comes with a short-term solution, which may be exactly what your forecast suggests is needed.

Know your rights

When your business is running into difficulties, it’s natural to fear the worst and be anxious about speaking to your lenders or investors. But understanding exactly what your rights as a borrower are is a key place to start.

Typically, whoever you are borrowing money from (your bank, a marketplace platform or other lender) will have signed up to the Lending Standards Board’s Standard of Lending Practices, which explains how you should expect to be treated by a lender.

The Lending Standards Board works to a single, clear remit: to promote fair lending. It wants to ensure that small business borrowers are treated fairly and receive a fair deal from their lender – as set out in the Standard of Lending Practices.

As a business owner, the Standard of Lending Practices is a really useful resource for advice and support related to debt finance in particular.

Top tip: timescales will always affect the funding options available to your business. Go to lenders and investors with a long-term forecast and plan while you have money in the bank, and you are much more likely to get a favourable answer than if you go cap in hand when the cash has run out.

Seek advice

As a business owner, even someone that is experienced in accessing finance, you should always seek independent advice before taking on any product or approaching a finance provider. That independent advice can help you present the case for investment or lending in a way that will increase your chances of success.

Speaking to a corporate finance adviser is a good place to start. In the first instance, your adviser will look at whether debt or equity is most appropriate or most likely. They can then help you identify potential sources for funding and how to approach the lender or investor to maximise your chances of success.

Top tip: to find a corporate finance adviser, contact ICAEW , who can connect you to a relevant and trustworthy member firm.

  1. Think through the impacts of major change in your particular market and your business as a result of COVID-19 - A contingency plan, where you’re going to be most effective or changes you can make in your business and what the consequences might be for your need for finance.

Stephen Pegge, Managing Director, Commercial Finance, UK Finance

Managing debt

A debt adviser can help your business assess its cash position and forecast your cash needs.

Initially, their help will focus on preparing your management team for a discussion with your existing lender about the business’ cash position.

The debt adviser will also understand the effect that taking on debt will have on the financial structure of the company. They will be able to identify and access the appropriate debt providers to support the business’ needs, and then advise on the terms on which the debt is being offered.

Other ways debt advisers can support your business:

  • Provide guidance if your business needs to refinance existing debt facilities
  • Provide guidance on accessing new debt products
  • Advise on ways to reduce financial stress within your business
  • Support management in raising finance

Debt financing options include:

  • SENIOR DEBT; This is the most secure lending your business will have. Usually, you’ll need to use assets like property or plant and machinery as security to access it. In the event your business fails to repay, the senior debt provider will have a first lien claim – this means they will be the first to be paid if you default.

The most common types of senior debt are ‘senior term debt’, which typically involves a lump sum repayment (called a bullet repayment) after a fixed term or a series of repayments in line with an agreed schedule, or a ‘revolving credit facility’, where you can get funds and repay flexibly. Banks and increasingly loan funds will provide these.

  • SUBORDINATED (SECOND LIEN or JUNIOR DEBT); Simply any type of debt that will not be paid until all senior debt is paid in full. Various types of loans with different priorities fall under the umbrella of subordinated debt, including bonds, mezzanine or vendor notes.
  • UNITRANCHE; A blend of senior and subordinated debt from a lender, a group (syndicate) or club of lenders. By combining the two types of debt, lenders spread risk and the borrower pays a blended interest rate, somewhere between the two interest rates that would typically be charged for senior or subordinated debt.
  • PUBLIC BONDS; A public bond is issued by a company in exchange for a loan, which it is obliged to repay at a fixed date. Being public means, it can be traded on public markets. Typically the funds would be used to finance long-term investments, depending on the length of the term of the bond.
  • PRIVATE PLACEMENTS; A bond, sold to a small group of investors, which is not made publicly available and is not publicly traded.
  • TRADE FINANCE; Trade Finance isn’t strictly a loan but a facility that allows a business to trade abroad by reducing the risk of non-payment by a supplier. There are different variants of trade finance, including letters and lines of credit. Here, the bank will pay the supplier for goods received, rather than lending money to the business trading abroad.
  • SUPPLY CHAIN FINANCE; Where the lender deals with the buyer, instead of relying on the creditworthiness of the supplier. The suppliers sell their receivables at a discount to banks or other lenders, often called factors, getting faster access to money.
  • ASSET-BACKED LENDING (ABL); A blend of invoice finance with funds released against other business assets, such as stock, property, plant and machinery, providing additional capital than invoice finance alone.
  • HYBRID; A lender takes a mix of debt and equity stakes to blend the investor’s risk.

Managing equity

If a business already has investors (for example, through angel investors or private equity), then the chances are that it will have access to their knowledge and expertise, to help manage bumps in the road.

It’s vital to speak with existing investors at an early stage and again, if you’re looking to raise equity funding to address working capital challenges, the first step should be to seek advice.

If equity is the most likely option, then a corporate finance adviser can provide input to the strategy for the equity raise, be it from private sources of capital or from public markets.

The corporate finance adviser will help the management team evaluate the financing alternatives and enter into negotiations with private equity if that is the route being taken. They can also help manage the process if the business is going to public markets.

  1. Think through the impacts of major change in your particular market and your business as a result of COVID-19 - A contingency plan, where you’re going to be most effective or changes you can make in your business and what the consequences might be for your need for finance.

Stephen Pegge, Managing Director, Commercial Finance, UK Finance

"In terms of guidance regarding COVID:19, we urge businesses to contact their finance providers early to discuss how they can support themselves and their clients and customers through the coming weeks.”

Stephen Jones, Chief Executive, UK Finance

We understand that you are worried about cash, about your people, and about your customers.

Emma Jones, Enterprise Nation

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