The UK business sector needs more financial support as a whole to ensure alternative lenders are not frozen out during the COVID-19 crisis, according to Conister Finance & Leasing.
The financial planner noted the Government has been quick to back sectors post COVID-19 that are resilient to recessions and market volatility.
However, the firm also suggested that this is where alternative lenders that understand the needs of specialist SMEs, often in their lending infancy, can provide additional support and natural lending progression alongside the larger clearing banks.
Alternative lenders understand the characteristics of specialist SMEs and with the flexibility they offer, empower their staff to make judgement calls on capital requirements, the financial planner stated.
The firm also highlighted that there are significant amounts of private capital “waiting to be invested” in resilient SMEs and that the market share of clearing banks has “fallen significantly” in a more diversified lending sector.
With the economy facing a recession that could last into late 2021, Conister Finance & Leasing director, Douglas Grant, suggested it will need these resilient sectors to be protected.
“As traditional banks deal with the impact of COVID-19 around their balance sheets, it is likely that they will have to pause financing discussions around succession and growth financing as well as recapitalisations, in order to redirect resources to addressing an enormous influx of CBILS applications from capital-starved SMEs,” Grant said.
“Those resilient SMEs who have weathered the pandemic best in their sector will be able to benefit from the potential acquisition opportunities to increase their market share and will need capital to carry this out. Alternative lenders have the know-how and flexibility to help process this type of financing quickly and effectively.
“Without legacy loan books and unencumbered by CBILS applications, coupled with high levels of dry powder, alternative lenders working together with clearing banks can help to execute rapid credit decisions on flexible terms.
“The UK business sector as a whole needs both more financial support for the alternative lending sector which is working together with traditional banks but also more sustainable initiatives to support SMEs in more resilient sectors from the Bank of England as we come to terms with an increasingly capital hungry economy – an issue that necessitates urgent attention.”
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