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NEW - June Budget Brochure
Please read and download our new June Budget Briefing (as a PDF 500k).…
Golf Day 2010
On a wonderful summers day in mid June, East Lancs Chamber of Commerce members Hayes & Co held their Annual Golf Day at the recently extended Mytton Fold Farm Hotel and Golf Club. See photographs on Flickr or read more...…
Debt funding for SMEs
The Bank of England's recent Credit Conditions Survey reported that banks tightened credit availability in the final three months of last year…
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Debt funding for SMEs
The Bank of England’s recent Credit Conditions Survey reported that banks tightened credit
availability in the final three months of last year and it is widely
acknowledged that securing funds has been even more difficult in the first quarter of 2009.
New lending is being restricted by lenders in an attempt to strengthen their balance sheets and this caution is also being applied to renewals of existing facilities. There is likely to be an increasing number of defaults during 2009 which will weaken those same balance sheets they sought to strengthen.
It will take a brave institution to start lending with so much uncertainty around. Even the support offered by government backed securities
appears to have had little effect so far. So what does this mean for the small entrepreneurial business? Smaller deals and acquisitions of distressed companies may continue to flow for those with cash reserves. Defensive mergers and share-for-share exchanges may also be a feature of 2009. However, debt-laden businesses are now starting to
concern themselves with negotiating a renewal or extension to their
existing debt facilities.
Previously the borrower could to an extent dictate the terms, now the boot is on the other foot. As a result, proposals to banks need to be more ‘watertight’ than before. The cost of borrowing - both in terms of fees and rates over base (or more likely LIBOR) - remains high despite repeated cuts in the Bank of England base rate.
The lenders are applying rigid terms. Most funders remain cautious about their lending portfolio, especially highly geared owner-managed SMEs and businesses showing signs of suffering in the recession. As credit conditions continue to tighten,
businesses are finding that the
renewal or refinancing of existing debt facilities is becoming
increasingly difficult.
Borrowers should work closely with their existing funders. They should provide regular, timely management information and business plans, projections and cash flow forecasts, all of which Hayes & Co can assist you with.