You’ll need a compelling strategy for growth to secure funding - Catriona Smith

As many parts of the wider economy start to reopen, it’s encouraging to see an increased level of optimism amongst the Scottish business community. The latest Addleshaw Goddard Scottish Business Monitor – produced in partnership with the University of Strathclyde’s Fraser of Allander Institute – highlighted that almost 90 per cent of firms are confident that their chance of survival over the next six months is somewhat or very likely.

Catriona Smith is a Corporate Lending and Borrowing Partner at Addleshaw Goddard

The outlook for economic growth has also improved, with 25 per cent of those asked expecting a 'positive' next 12 months – an encouraging sign after a sustained period of uncertainty.

That said, businesses will now be looking at a range of strategies to ensure they are robust, resilient and poised to recover.

Unlike the financial downturn in 2008, capital reserves have been bolstered over the course of the last decade – ensuring businesses have access to finance even in the case of an economic downturn. The introduction of government-backed coronavirus lending schemes saw SME lending double in the first quarter of 2020 compared to the previous year.

But liquidity is still available. Whether you're applying for finance through a new or existing lender, though, a compelling strategy for growth will be crucial.

Undeniably, certain sectors including retail, hospitality and tourism are facing more pressures than others but restrictions across the country are starting to ease. However, we have seen examples of existing lenders offering support to existing borrowers in these sectors if they have a strong management team with a clear vision for growth or return to profit.

We are also seeing existing lenders looking to be constructive, supportive and understanding, even for those businesses in extreme stress. Funders are taking much comfort from a trusted and experienced management team alongside the hard financials themselves.

Management teams should look to be on the front foot and present balance sheet strengthening strategies to their lending partners, proactively and positively.

Cashflow forecasting and projections, which can be incredibly tricky right now given ongoing uncertainty, are still very important. Over the last year, we’ve found that lenders have been focused on working with borrowers’ management teams to inform a business' short, medium and long-term performance.

Early engagement is key. The better your funder knows and understands your business – including any predicted hurdles – the easier it will be for your business to receive the support it needs, when it needs it.

The sustainability of your business, including its impact on both the environment and society, is set to become an ever-increasing focus, not only for lenders but also for equity investors, customers and employees. The banks have their own green targets to meet and if your business is aligned to that and can help them to meet those targets, you will be in a strong position to access funds.

Overall, despite the instability, there is an appetite from lenders to lend, but prices have crept up and term length is shorter from that which we've become used to in recent years. In the current climate, taking advantage of opportunities which require finance are taking longer to complete – acting early to create balance sheet liquidity will allow businesses to react and grasp opportunities when they arise.

Catriona Smith is a Corporate Lending and Borrowing Partner at Addleshaw Goddard