Elections can make things tough for growing businesses. Companies should ensure they’re adequately funded, says Chris Maule.
It is safe to say Britain has had its fair share of economic and political unrest in the last two years. In addition to the referendum, we now have an early general election to contend with; with more change in the market and in government imminent, entrepreneurs and seasoned business owners alike will be thinking carefully about the opportunities for growth.
Generally, businesses prefer a Conservative government because they tend to be pro-business and pledge an economically stable environment. Yet as we saw in the 1997 landslide, many business leaders are firmly aligned to other parties.
Many predict a landslide Conservative victory and the downfall of Labour. But nothing is certain until the results are in, as some senior Conservatives and recent polls have told us. Indeed, Tory poll rankings dipped after the party’s manifesto was announced.
Businesses spoke out negatively against the commitment to cutting immigration to “tens of thousands”, placing a strain on the vital transfer of overseas talent into the country. Furthermore, levy increases on firms who employ non-EU migrant workers, curbs on foreign takeovers, plans to restrict executive pay and talk of a “no deal” Brexit caused a stir. However, they promise to reduce taxes on Britain’s businesses and review the business rates system to bring it more in line with the modern, digital consumer.
The Labour manifesto includes policies to reinstate the lower small business corporation tax rate, to reduce the funding gap through new regional development banks, to scrap quarterly reporting for smaller businesses and to “declare war” on late payments. With a goal of reducing bureaucracy and adding cost efficiencies for SMEs, business owners will be seriously considering both of the main parties.
Regardless of which party achieves a parliamentary majority, for businesses, the period before political events such as these can and does produce currency fluctuations, disrupting supply chains and making international trade more difficult. The threat of tax rises, or of fiscal irresponsibility that might lead to a downturn, can quickly put the brakes on consumer spending and the economy, too.
Whatever the political weather, the best time to look for finance is before you launch a business or embark on a significant expansion, for money problems are not just a distraction, they can ruin a business.
A firm can be notching up orders and issuing invoices but none of this helps if bills go unpaid. Entrepreneurs find themselves digging into personal funds to finance working capital requirements and it can’t go on forever.
In times of uncertainty, businesses should be prepared financially. An accountant will tell you the best time to look for growth funding is when you don’t need it because it may not be available when you do – desperation looks bad and is hard to conceal.
Far-sighted entrepreneurs will be looking far beyond the 8 June election and they now have more options available to them than ever before, largely due to technology. Digital commerce and cloud computing can connect growing businesses to funding sources more quickly, economically and effectively.
Companies that are adequately funded can take advantage of the uncertainty because they are better placed than their underfunded competitors. But they must do their homework and talk to people who know about growth finance.
Banks generally require either security or a personal guarantee which some entrepreneurs may be unable or unwilling to provide. Overdrafts are hard to get, costly and can be summarily withdrawn.
Corporate bonds offer a great alternative. After a quick response, SME borrowers who qualify through our platform get reliable, guaranteed finance, tailored to their requirements, guaranteed through our underwriting relationships with institutional investors.
Borrowing rates are competitive, from 9%; terms vary from 12 months up to five years. Our funding amount ranges from £500,000 up to £4 million. Generally, our platform lends to businesses with EBITDA greater than £350,000, or with liquid assets worth more than £500,000.
Added to this, investors using our platform are sophisticated and understand business challenges, choosing to back companies they understand and are attracted to, based on their own experience.
By Chris Maule is CEO and founder of UK Bond Network