Herald - Issue 405

Page 52 • The HERALD • 22nd April 2021 v SUPPORT YOUR LOCAL SPECIALISTS v ASK A PROFESSIONAL NP Bookkeeping & Accounting • Bookkeeping, VAT, Payroll • Streamlined Services & Free consultation • Insured & Certified 07742 613615 or nandie.pretorius@np-bookkeeping.co.uk by Jim Shaw, partner at Shaw & Co Barely a day goes by without forecasts predicting continued and signi cant challenges throughout the economy during 2021. Evolving financial support from the Government, the fallout from Brexit and continued business and unemployment woes in retail and other sectors, have hit Small and Medium Sized Enterpries (SMEs) particularly hard. What options are available for business managers and owners to help them not merely survive but also to ourish in 2021? Jim Shaw, partner at Shaw & Co explains the top six key issues that he believes every SME owner/manager should be thinking about. Cost cutting When income is threatened, businesses naturally review costs. Many that were forced into making signi cant savings in 2020 found a new realisation – savings can be made without necessarily negatively impacting delivery. E ciency is therefore a key theme for 2021. For many businesses, the most signi cant cost is people related. Job rationalisation presents a risk to culture and morale, so it is worth considering carefully. With remote working a feature of the ‘new norm’, dealing successfully with personnel change presents a significant challenge. is drive for e ciency is accelerating digital evolution which o en requires investment. In times of challenged cash ow, this can be a barrier to achieving these long term bene ts. Cost cutting or more accurately increased e ciency, from whatever perspective, is something all SMEs must address to compete in 2021 and beyond. Maximise cash from existing assets It is rare for businesses to carry signi cant unencumbered assets, but it is worth reviewing whether further cash can be extracted from property holdings or debtor ledgers. Property assets such as o ces, factories etc., may present opportunities for sale-and-lease-back schemes to free up capital, whilst retaining long-term certainty of occupancy. Alternatively, if the current debt on the assets is relatively low, simply re- nancing may release adequate capital whilst retaining ownership. Raising su cient nance may not be achievable through traditional banks, as they reduce their credit appetite, but alternative lenders could well o er the desired solution. Raising debt and ‘terming out’ existing loans 2020 saw net debt to UK businesses grow 5-fold, reaching nearly £0.5 trillion, of which over £70 billion came from Government emergency funding. Repayment holidays onmost Bounce Back Loans and Coronavirus Business Interruption Loans expire in 2021, which together with deferred HMRC and rent liabilities, adds to the notable debt servicing burden carried by an average UK SME. A er the funding urry of 2020/1, banks’ appetite for lending in 2021 is set to tighten. e alternative lending market is there to ll the gap with a plethora of well capitalised and resourced lenders seeing the opportunity to grow market share. However, given the very niche product specialismof most alternative lenders and wide pricing variances, SMEs would be wise to seek expert advice on navigating this market. Alternative products do tend to o er longer amortisation terms (o en 8–10 years), as well as bullet repayment features, thereby reducing the overall debt servicing cash ow burden. Many alternative lenders will seamlessly lend alongside mainstream banks, so are a viable option to ll the capital shortfall le by banks. e speed and exibility of credit underwriting, higher leverage and not having to move business accounts from the existing bank may also appeal to many SMEs despite higher rates. Raising equity SMEs unable to ful l their funding requirements in the traditional and alternative debt markets can consider an equity raise. Raising equity is of course dilutive to business owners, but comes without, or with much reduced, interest and capital repayment, meaning that more The Six Things SMEs MUST Consider Continued on page 53