Financing in a post pandemic world

As 2020 begins to come to a close, we ask Toni Dare, Managing Director of Pulse Cashflow to give her view on how the finance sector has been impacted.

The whole of the financial services industry has been affected by the pandemic because UK Businesses for the first time in my lifetime are spoilt for choice in terms of the funding that is being made available to them.  Which is great news.

The Government support schemes have succeeded in placing a large amount of financial support into the UK business sector.  Latest figures reveal that in excess of £62bn (as of 18/10/20) has been lent to businesses under the Governments’’ business loan schemes according to Treasury figures.  The majority of this was through the Bounce Back Loan Scheme (BBLS) with more than 1.3m small businesses receiving a total of £40.2 bn This has meant the demand for invoice finance like all other forms of finance has reduced as businesses are using Government packages to help their businesses through these challenging times.

This has naturally had an impact on the number of businesses seeking invoice finance – I think for the first time in many, many, years the UK Finance statistics report a drop in the numbers of businesses seeking Invoice finance from 42,000 to 38,000.

What are your expectations for how the pandemic will affect the availability of traditional financing for businesses?

By the end of the crisis, you may see a reduction in the number of funders in the market as some consolidation will inevitably occur. 

The BBLS funds are being used to by directors and owners/managers to support their businesses to ensure they survive the crisis.  Making sure their business is still there when we come out the other side is utmost in their minds.  However, these funds are and will continue to be depleted over time and we will start to see a resurgence of demand for cashflow funding to help firms take advantage of the opportunities as they arise.  I cannot see any change to both traditional or alternative forms of finance to support businesses into the future.  What will change is the process of signing up new transactions. We have become used to an increased use of technology which will not go backwards.

This is an industry which has seen an increase for its services both in recession as market capital reduces and during recovery and or boom when business is hungry for growth funding. This is why it is such a valuable product in the market-place.  

Pulse Cashflow offers a specialist solution for construction businesses. Why was an industry-specific solution necessary?

The construction industry has always been challenging to fund with stage payments and the contractual nature of the work involved.  Traditional funders have always limited the amount of funding available which can disrupt plans, whilst alternative funders such as Pulse Cashflow have always worked to support this important sector.  Our construction linked finance solution provides funding up to £1.5 million, to business linked to the construction sector but perhaps who do not have so many of the features seen with pure construction finance with applications for payment and contractual obligations.  We are mindful of the challenges many face when funding this sector and this solution is our response to helping to service this industry.   It enables firms in the sector to access a flexible source of funding by releasing up to 90% of the value of outstanding invoices before they are paid. We provide the funding and manage their credit control, chasing and collecting outstanding invoice payments which saves time and money.

Which other industries require a specific approach to invoice financing?

Numerous sectors have a higher propensity to use invoice finance.  Sectors where credit terms are lengthy or there are inherent late payment issues.  The distribution sector for example have high upfront costs - employing drivers, covering fuel costs and vehicle maintenance but can only invoice at the end of the month and then possibly have to wait 30 days to be paid.  They have to fund this gap between paying their costs and receiving income.  This is an ideal situation where invoice finance can have a high impact.

How has the accelerated digitization of the enterprise, the result of working-from-home requirements, affected invoice financing, if at all?

Like many businesses and sectors, business life has continued, and we have remained open and committed to supporting UK businesses at all times.  At Pulse Cashflow, we placed a strong emphasis on digital processes before the pandemic and this will continue to ensure that we can deliver a fast and efficient solutions for our clients.  We have been able to transition between working in the office and working at home seamlessly with no detrimental impact to our clients.