A recent CBI webinar highlighted how the innovation and growth funding landscape is changing, and will continue to change as a result of Covid-19.
The pandemic has resulted in a big rise in the number of businesses borrowing who haven’t done so before. There’s been an increase in the proportion of UK SMEs using finance, from 30% to 40%. In some sectors, such as manufacturing, this figure is as high as 50-60%.
The total outstanding debt for all SMEs has increased by 23%, which is not unsustainable overall. But some individual businesses are facing real pressures. It is expected there will be a different pattern going forward – some businesses will still struggle but there are a large number who have adapted their businesses over this period and want to use finance to pivot their business
Two-thirds of businesses think they’ll need finance through to next year.
During the last financial crisis, there weren’t many small business lenders. But now, there’s a lot more competition in the market, with over 100 accredited CBILS lenders. This is great in some ways for small businesses, but can also lead to more confusion as to where to get the best deal.
There’s also a lot more lending happening online, a trend which is likely here to stay.
This situation will leave behind a very changed landscape.
The role of the banks and government in supporting the economy through enormous disruption, quickly and at scale, has kept the economy afloat and unemployment down. However, history suggests that when coming out of every recession, the key risk is investment being much lower than before. The significant fall in business investment is one of the most concerning statistics.
There is therefore a need to recapitalise a range of companies who have struggled. This will require the support of both lenders and equity, which is a new dynamic.
Due to the uncertain macro-economic picture, companies are being much more cautious. So, there’s a latent need to give certainty to encourage investment.
- Stimulating business investment post-Covid will be vital.
- SMEs are now more open to external funding and there are more options open to them. The potential downside to this is that the funding landscape is becoming increasingly complex.
- SMEs will have different funding needs, depending on how they have fared during Covid-19. One size won’t fit all.
- Making the right decisions at the start and developing a short to medium term funding road map – recognising that debt finance can ultimately be much less costly than equity – will reap dividends in the future. Blended finance solutions will be inevitable.
Where Infintec fits in
The Infintec team has years of experience helping ambitious, growing tech businesses innovate successfully – raising hundreds of £ms of non-dilution funding – through helping our clients to become more fundable, and identifying and sourcing the funding they need.
We are unique in that we cover the entire funding landscape, and we make it happen.
We don’t signpost. We deliver – working as your partner to access the most appropriate funding and to implement the best commercialisation strategy.
Why not give us a call on 0114 553 5208 or email [email protected]