2020 has been one of the most challenging years on record for a huge proportion of small and medium-sized enterprises (SMEs).
In fact, a survey by the British Business Bank found that 54% of smaller companies contracted in 2020, which is a huge increase from the 22% in 2019. With the number of restrictions that were put in place during the course of the year, as well the general climate of uncertainty that was created by the coronavirus pandemic, none of this is massively surprising.
As a result of all the challenges faced by SMEs, this has inevitably meant that lending skyrocketed in 2020. The most common reasons were:
• To help with concerns over the cash flow situation.
• To change their business model (often to create an online ordering system).
• To improve the general digital capability of the company.
Indeed, 45% of companies required external financial support of one kind or another in order to keep ticking over. With an increased level of optimism finally starting to be felt, many companies are now applying for finances to fulfil their ambitions of recovery and growth in the future.
Many businesses relied on the government-backed support and gross bank lending that was made readily available. Its widespread promotion may well have been a central part of this. Other traditional forms of finance, such as credit cards and bank overdrafts, were largely shunned. However, it is important to note that only one in ten companies rely on government support on its own. Many more are reaching out to financial options, such as invoice financing, to improve the cash flow.
A large part of the business world is based on the optimism that companies feel in the growth department. The survey by the BBB found that 21% of companies are anticipating growth over the next 12 months, which is lower than the 28% in pre-pandemic times. There have certainly been signs in the UK market that consumers are starting to feel more of a sense of optimism as they return to city centres, and those in the hospitality industry, one of the hardest-hit industries due to the pandemic, will be hoping that this will be the case. While the optimism that is being felt is a cautious kind, it is present nevertheless.
Of course, we still live in uncertain times, and no one can ever be entirely sure what the following months and years are going to bring, but there is no doubt that the success of the vaccination program has given confidence to businesses that they have been largely stripped of over the past 18 months. One of the last sectors to recover is aviation, but this too is starting to show signs that it is bouncing back. Many companies are going to need to apply for additional financial support to see their dreams of recovery come true.
TSF is an independent, commercial finance brokerage focused on the SME market. Having worked with businesses in a wide range of different industries and at alternative stages in their lifecycle, the experience of the firm and the personalised level of service offered ensures that the team can help SMEs in a number of industries.
TSF Finance can source experienced lenders with a range of financial products and services to suit each individual SME.
Watch our latest webinar for more insights on SMEs over the last 12 months and how we've supported them.
