CoVid-19 and Brexit a toxic mix designed to create a poisonous cocktail for UK SME’s


CoVid-19 and Brexit a toxic mix designed to create a poisonous cocktail for UK SME’s called uncertainty on the rocks – here’s some ingredients for an antidote !

I’m writing this article with at least two very old hats on. The first is as an entrepreneur with over 40 years’ experience of creating and running a diverse range of SMEs, and still doing so. I am also Executive Chairman of non-bank lender Just Cash Flow PLC that provides a range of flexible finance facilities for UK SMEs looking to invest and grow.

I think one of the most commonly used phrases over the past few months has been ‘we are living in unprecedented times’, referencing of course the dramatic worldwide impact COVID-19 has had. If you add all things Brexit into the mix you certainly have a rich cocktail of uncertainty.

In my opinion ‘uncertainty’ and its shadow ‘hesitancy’ are the biggest enemies of business owners as it causes us to doubt our own capabilities.

It’s extremely important for business owners to consider if all things COVID and Brexit are indeed a threat or a possible hidden opportunity – only if we ask the question with conviction will the answers begin to appear.

However, having managed businesses through various recessions and more than one global financial crisis I believe I am able to proffer guidance and advice on how business owners could be responding to all this uncertainty. I believe I can also help them improve their chances of securing the flexible finance facilities they will need to rebuild their businesses and make a major contribution to the UK economic recovery.

So here is one piece of wisdom I’ve learnt along the journey – quoting Heraclitus “the only constant in life is change” uncertainty equates to change but if you plan for it then, logically, the fear of uncertainty becomes less so.

Okay let’s start removing some the uncertainty by assuming some of these points (you don’t have to agree with them – just plan for them)

  • COVID and the dramatic impact on our lives is going to be with us for at least another 12 months.
  • Brexit will impact how we do business with Europe and it won’t be as plain sailing as before.
  • In my view, traditional banks won’t be doing much lending in Q1/Q2 next year especially to the S in SME due to the way they are structured and the legacy of dealing with Government support schemes.
  • Credit lines with suppliers will dry up.
  • No-one in Government is going to save you or your business – it’s down to you.
  • Someone else will steal your customers if you don’t find a way to serve them.

None of the above is good news but the uncertainty has been removed and the challenge is now to plan how you are going to do business in this environment. To be successful, and I can’t stress this enough, you need to have a flexible and adaptable mindset (along with your team) and the energy to execute the plan you have devised and then be willing to change direction if the wind changes.

Some examples for you:

We have a customer that produced made to measure women’s evening wear. Virtually overnight COVID stopped this business in its tracks. A flexible and adaptable mindset immediately kicked in and the owners re set their factory and started sewing scrubs for frontline NHS staff. This quickly evolved into the company installing additional machinery to switch to making PPE equipment, which we were delighted to fund.  Contracts with health trusts quickly followed. They of course will need a plan for when there is no longer demand for such garments.

We are invested in a green energy company that historically targeted the leisure sector which of course has been severely impacted by COVID. Apart from furloughing some staff this company didn’t receive any Government support. The ‘certainty’ that the leisure sector will continue to suffer was rapidly accepted and this cleared the minds to focus on other opportunities. A gap was identified in the infrastructure supporting the electric vehicle market and all of the company’s skills and expertise are now focusing on this challenge. Out of the woods? – no, but the outcome of taking no action was certain failure.

Of course you can have all the flexibility and adaptability in the world but you will almost certainly need financial support to bring your plans to fruition and this is where non-banks (sometimes referred to as alternative lenders) like Just Cashflow have a role to play.

John Davies - Executive Chairman of Just CashFlow in conversation

Many businesses won’t survive COVID, the various lockdowns and the virtual overnight disappearance of their revenues will have built up levels of unserviceable debt (£35bn according to recent report from The CityUK Recapitalisation Group).  I have been there before and it hurts – in fact it hurts a lot but if entrepreneurship is in your blood then you need to get back in a new vehicle and try again.

The type of SMEs that are going to be a key driver of our economic recovery are those that are driven by real entrepreneurs who have a passion for being in business. These are the ones who are going to need support and the non-bank sector has a key role to play in supporting them.

I’ve already shared my view that I don’t expect traditional banks to be lending significantly in Q1/Q2 next year. Additionally, they aren’t really set up to support those entrepreneurs whose businesses have been destroyed by COVID,  even though they have the flexibility, enthusiasm and adaptability to change direction or start new businesses.

These entrepreneurs probably won’t be able to meet policy requirements to provide the last three years accounts/balance sheet and have the opportunity to explain the crushing damage COVID inflicted on their businesses. This isn’t a criticism – it’s just the way big banks work. I think we will see a lot of “computer says no” or worse the kicking of applications into the long grass.

Non-bank lenders, like ourselves, work on the basis that good businesses don’t become bad businesses overnight and neither do the people who run them. We use technology and human expertise to identify business that have the propensity to be successful. We look at a much wider range of data points than traditional banks to help us make more informed lending decisions. Business owners also get to speak to business underwriters who have lived through a number of recessions and know a good business proposition when they see one.

Over the years I have seen many thousands of business finance applications, so here is some guidance on how to maximise chances of success:

Firstly, avoid any adverse credit event. By this I mean County Court Judgements, winding up petitions or returned items (bounced cheques) – both at a personal and business level. Of course this is easier said than done but a business owner must focus on protecting their financial reputation and display positive behaviours. Key to this is communicating with all creditors about what your future plans are. Sticking your head in the sand (not answering calls / emails/demands) isn’t an option and the last thing creditors want to hear is that you are waiting for things to return to ‘normal’- they want to hear you have a plan.

Secondly, have a well thought out business plan that shows flexibility and adaptability, know your numbers and come across as someone in control of your own destiny.

Real entrepreneurs are creative, driven and passionate about post COVID / Brexit opportunities. Non- bank lenders are equally passionate about providing these entrepreneurs with the financial support they need.


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