The challenging economic climate means it is more difficult to transact certain types of deals than it has been in the past, however it would be incorrect to suggest good businesses cannot secure funding. By Sean Dixon
If the business is well managed and has good prospects they should still be able to secure funding from banks.
Deal structures could be described as more conservative in nature than they have been in the past but will naturally focus on the individual merits of a transaction.
A particular structure that worked 12 or 18 months ago may not be appropriate in today’s market.
There are still deals being done even though volumes are down on previous years and we expect this will be the case for the rest of the year as the market is driven by quality rather than quantity.
We expect to see merger and acquisition activity driven by consolidation as companies look to make savings and achieve synergies where possible.
Stronger businesses in all sectors will look to capitalise on weaker competitors and this could drive the market as well.
There is a degree of caution in the market at the moment with businesses waiting to see what will happen to the economy.
We would expect to see more transactions in the second half of the year as businesses look for price corrections in the market.
Evidence of my own Banks’ commitment to provide lending to UK businesses is demonstrated in the announcement earlier this year that NatWest and RBS are to make an additional £3 billion funding available to SMEs as part of the commitment made by the bank to increase lending to UK personal and business borrowers by an additional £25 billion.
Ulster Bank is providing the Fund for Northern Ireland’s businesses.
The funds provide a comprehensive package of funding choices for SME’s in each region right across the UK.
In addition to providing traditional debt finance, the new funds offer businesses the opportunity to access other avenues available to help them manage their capital and cashflow through the current economic downturn and you will know from my previous articles how important cashflow is to ongoing business growth.
We have also led the field in providing the Enterprise Finance Guarantee (EFG) funds to SMEs.
The Government-backed scheme aims to ensure that smaller businesses, with an annual turnover of up to £25 million, have the necessary working capital or investment finance in place to help them through the difficult economic climate.
Under the EFG Scheme the Government will guarantee 75 per cent of any loans made, meaning that banks can provide support in cases where there is a viable business plan.
At the time of writing NatWest and RBS have £165 million worth of EFG loans either sanctioned or in the pipeline.
So, finance is available for well managed businesses of all sizes, just as it has always been.
As always, the key is to communicate plans with bankers at an early stage to ensure you are aware of what is possible.
Sean Dixon is head of services and construction for the UK corporate banking team at Royal Bank of Scotland