insights
Now COVID-19 Government financial support to businesses is beginning to wind down, many owner-managers need to think about their strategy to bounce-back.
In terms of providing financial support to businesses, the UK Government’s response to the COVID-19 pandemic was as swift as it was completely unprecedented. The Government’s “financial package” included the Job Retention Scheme, the Retail Hospitality and Leisure Grant Fund, loans schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS) for small and medium-sized businesses and the Covid Corporate Financing Facility for large companies.
Additional support was provided by way of the Bounce Back Loan Scheme (BBLS) for small and medium size businesses, and more recently there was the announcement of Project Birch, the provision of financial support and/or equity stakes to large companies affected by the pandemic, as a “last resort” to prevent company failure.
As lock-down measures continue to ease in line with the national vaccine roll-out programme, the support from the government has also eased. Owner-managers are now faced with several factors that need addressing before developing a COVID-19 exit strategy and fully bouncing back.
COVID-19 forced business owners to make tough financial and operational decisions in terms of staff redundancies, cuts to marketing budgets, and business models pivoting towards digital innovation and virtual delivery channels. So, before developing any sort of bounce-back strategy, these owners will need to accurately assess the financial damage caused by the pandemic – the company’s financial accounts (balance sheet, income and cash flow statements) will all need to be updated and compared on a like-for-like basis with the previous year’s corresponding period to reflect the business’ performance over the period.
Unless an owner-manager had significant surplus cash going into the pandemic, it’s likely that access to funding will now be critical. There are several sources of finance available to businesses, provided by a wide range of funders offering products such as asset-based loans, invoice discounting, mezzanine finance, stock finance, cash flow loans and other various debt product types.
Additionally, if an owner-manager have a strong business with excellent growth prospects and backable management team, private equity may also be an option, depending on whether dilution of ownership is on the table for consideration.
Whether it’s debt or equity financing, they are united by the need for detailed cashflow forecasting. Owner-managers will need well-presented cashflows and sensitivity analysis to model out different financial scenarios before speaking to the financial community in a credible fashion.
At PEM Corporate Finance, we know our way around raising capital for owner-managed businesses.
Please get in touch if you’d like to hear more about how we can help.