Clouds are only ever temporary

More than half of small firms, 58% to be precise, say that the persistent political uncertainty surrounding Brexit is a significant barrier to growth, with business confidence now at its lowest level since the tail end of the financial crash in 2011. This is according to the latest Federation of Small Businesses (FSB) Small Business Index published today (21 Jan).

Worryingly, the report also shows borrowing costs for small businesses are increasing with 74% of respondents saying they were being offered rates of 5% p.a. or more when their applications were successful. Only around 1-in-8 small businesses are bothering to apply for finance at all.

So, the mood music is pretty bleak and, of course, there is nothing we can say here at Productivity Finance that will remove the threat, real or perceived, of the economic shock of a chaotic exit from the European Union.

We can, though, venture some opinions.

A temporary hiatus is a natural, arguably sensible, reaction to the uncertainty, but temporary it will be.

British businesses are remarkably resilient and, no matter how disruptive Brexit is, they will find a way. Why? Because they know life has to go on. Planning, hiring and investing will return when we establish the 'new normal'. 

Money needn't be expensive if it is correctly sourced and structured. Even if you have to pay a few percentage points more than you would ideally like, the cost of money needs to be looked at in relative terms. By historical standards, it is still very cheap and it can be the right decision to borrow funds to enable projects that wouldn't be possible using cash reserves alone.

Mike Cherry, FSB National Chairman, said when commenting on the results: "When times are tough, big lenders often put supporting small businesses on hold.” We have to say that this is not our experience at the present time and the major players are open for business if the application is well reasoned and well presented. There are also very well established alternative lenders in the market with equally strong appetites to lend.

We recently helped a business invest in a new technology platform and restructure its working capital facilities, and, here, the mainstream lender was willing to advance more than was initially requested.  This was all possible because we developed a long-term funding strategy for the business and presented it correctly. In a way, this is what the bank managers of old would have done. The difference and advantage for us and our client is that we aren't limited to one source of finance.


In summary, continue to look ahead and take a long term view on your business. The storm clouds will pass and it is the businesses that keep looking forward that will emerge the strongest.

Clouds are only ever temporary

By: Paul Marston

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