"I believe that the availability of funding is going to reduce, as lenders reconsider their appetite for risk and become more cautious "
With Brexit delays, a General Election and the continued death of the high street, it’s fair to say 2019 has been a challenging year for SMEs.
Brexit uncertainty has clearly impacted business confidence throughout the country, with a fifth of SMEs putting capital injection on hold. But as we look ahead to the start of the next decade what can we expect to see impacting on SME finance?
It’s not just small businesses that have been affected through Brexit uncertainty. Over the course of 2019, we’ve seen many peer to peer lenders shut down, either by choice or forcibly due to lack of capital and increased oversight by the regulator. Like any young industry, SME finance will consolidate, as the real needs of a maturing marketplace are revealed.
Whilst consolidation reduces the number of lenders from a borrower perspective, it does mean they will only be dealing with those lenders that have stood the test of time. We also can’t ignore the potential for regulation in the space. We welcome the changes that regulation would bring into the marketplace and the increased accessibility for SMEs trying to compare providers and products, as well as the increased confidence it will give them to borrow in order to grow their businesses.
Death of the high street
Businesses across the country continue to be impacted by high business rates, which continue to hurt and give increasing competitive advantage to those whose business models mean they need less storefront space. Alongside this growing pressure, I believe that the availability of funding is going to reduce, as lenders reconsider their appetite for risk and become more cautious due to HMRC becoming a preferred creditor from April onwards. These forces have ultimately hit the retail sector the hardest. There have been high profile insolvencies on the high street this year, with the likes of Mothercare, Thomas Cook and Patisserie Valerie all going into administration - but that doesn’t tell the full picture and the impact on smaller chains and independent stores that have gone out of business too.
Supporting the growth of UK plc is vital to the subsequent growth of our economy. As such, this is an area that the newly elected Government should focus their attention on, encouraging investment and confidence for businesses and to help ease their financial pressures.
One sector where we’re expecting to see a big impact next year is construction. Finances in this space can be notoriously complicated due to the nature of contracting and sub-contracting to enable projects requiring a multitude of skills to be completed. From 1 October 2020, HMRC’s new ‘reverse charge VAT accounting’ rules will apply to all qualifying supplies made on or after that date. This change will directly impact all contractors and subcontractors who supply construction services and is estimated to lead to major administrative changes for 100,000 to 150,000 businesses in the sector. The time and effort required to comply means that as we step into 2020, affected businesses need to ensure they’re prepared and have appropriate plans in place as the greatest impact is likely to be on their cashflow.
Tech takes over
Not only are SMEs embracing technology, but so are the industries that support them. Those who don’t keep up with digital transformation risk lagging behind and missing out on opportunities to grow. While this is nothing new, 2020 is the year we expect technology to truly have an impact on the bottom line for businesses as their investment bears fruit.
Businesses increasingly expect to access finance with a click of the button and thanks to technology, some lenders, including Nucleus Commercial Finance, now have an automated process in place from the request coming in all the way through to the payout of funds. This means we can provide a decision in minutes for deals of any size, where traditionally this would take days. For brokers this means less time spent on the administrative burden and gives them more time to advise the businesses they’re working with and ensure they get the best outcome. Brokers are in a unique position to help businesses see the benefits of external finance, find the product that is best suited to their needs, as well as save time, money and stress when they’re sourcing the finance they need to deliver their goals.