Brexit will have enormous implications for business, very few of them any good, so what can businesses do to prepare for what’s coming?
Brexit is coming, probably, at some point. Depending on which way you voted that’s either a good thing or very bad thing. Arguments continue to rage around Westminster and the country as a whole, but stuck in the middle of all this are small and medium businesses who have to manage this uncertainty and keep their finances ticking over?
Stick or twist
It seems that we’ve been arguing about Brexit forever, so it’s even more surprising that we seem no closer to getting a clear view of what it might look like when it gets here. Deal, no deal, revoke or referendum are all still on the table when we hit the latest deadline in October. This is maddening for businesses. Every fresh setback sends Sterling tumbling and sets business owners’ nerves jangling.
The Daily Telegraph Company Sentiment Tracker, which analyses business tweets for positivity and negativity, found that 23% were pessimistic while 13% were optimistic. Removing neutral opinions, it said 64% of firms were in a downbeat mood against 36% which could be described as upbeat.
How Small Businesses Can Weather the Storm?
The impact of a no deal Brexit could be profound. Businesses may have to pay tariffs on products imported from the EU. This could hit companies with unstable or variable incomes which import substantial quantities from the continent. They may try to look to other suppliers within the UK to reduce their costs.
Investment might be harder to come by. The European Investment Fund (EIS) is a useful source of funding. It does not invest directly into businesses but does channel this money through the banks. Removing this could make it more difficult to access capital.
The entire economy has already taken a hit. According to a major think tank, the UK economy is already 2.3% smaller than an imaginary doppelganger UK which voted to stay. That impact could be magnified once the UK’s exit from the EU becomes a reality.
Coping after Brexit
The unavoidable truth is that Brexit carries plenty of risks, but few tangible benefits. It will hit the wider economy, making business harder to come by. Investors may keep their money in their pockets as they wait to see which way the wind will blow and banks may be less willing to lend.
It is a difficult situation in which revenue may be at risk and capital will be harder to come by. At the very least this may limit the ability of small businesses to grow. At worst it could threaten their very existence. Indeed, the chances are that we will see an increase in the number of small business failures after Brexit. Others may decide to act before Brexit and relocate themselves into the EU.
Different sectors may be more affected than others. For example, sectors such as finance and technology, which often rely on highly skilled international experts and regularly collaborate across borders, may have more problems. A local business which doesn’t do much business overseas might be relatively unaffected.
Even so, as critics of Brexit point out, a general economic slowdown would hit the entire economy. Consumers would have less money spare and businesses would have fewer resources. Uncertainty will be everywhere and many sectors could be in for a rough ride.
One result of this could be that invoice and asset-based finance could grow. Alternative sources of capital, which rely on tangible assets and infrastructure, are becoming increasingly popular with businesses who are looking to plug short term funding options gaps. These could look attractive if your business has to go through a temporary dip after Brexit.
The advantage of these options is that they generally have a lower bar of qualification and can transfer the money more quickly. This is useful for short term situations in which companies need finance sooner rather than later. These do have costs and businesses will need a clear idea of how expensive this capital will be and what it will be useful for, but for any enterprise looking to fund growth or cover a shortfall in capital it could be crucial.
The only certainty about Brexit is uncertainty. Experts may say otherwise but they have little real idea of what will really happen. Few predict anything good, so the maxim for SMEs is to follow the example of the Scouts and ‘be prepared’. This will mean good control of finances will be key to how they weather the storm.
Getting the right deal
There are a small number of financing options that allow SMEs to borrow sums of money without having equally large minimum turnover requirements. There are even fewer that also provide a flexibility but is competitively priced. A quick turnaround in lending decisions that will be necessary to keep the economy afloat post-Brexit.
One of the main sources of funding for SME’s in the UK that offers all the above is Invoice Financing. This financial option may well hold the key to the betterment of the UK economy. SME manufacturers are facing uncertainty as a result of Brexit and growing competition from operating in a globalised market.
Comparing invoice finance and its growth with that of the country’s value is a clear indicator that small to medium sized businesses will continue to strive for growth. Hopefully this will last as long as GDP continues on an upward curve.
UK’s leading invoice financing brokers
Invoice Funding are a leading invoice financing broker in the UK. We are here to ensure you get the best deal available post Brexit. Simply complete the online enquiry form to get started.