Look beyond overdrafts to improve business cash flow

This is always the case, but for businesses of all sizes, cash flow is one of the most important success factors.

In an unprecedented year, this has never been truer, and while many companies have traditionally relied on overdrafts to spend less time, COVID-19 has changed goals in many ways.

It is understandable that the pandemic has affected the yields and profitability of some businesses, and with tighter credit in some cases overdrafts have been reduced or withdrawn. This can be challenging and it is important to remember that lenders have the right to withdraw this credit line at any time without notice.

After 44 years in the banking industry, most recently as NatWest’s director of communications for West Norfolk, I understand how global solutions can impact small regional companies. I’ve been through four major recessions during my career, and my experience is that trading outside of a recession is more difficult than trading through a recession.

I mean, while businesses can tighten their belts during tough times, the impact of delays on reduced cash flow can impact a business’s ability to function as orders increase.

I recently worked with a production customer who experienced this exact scenario. Even though the company continued to operate during the downturn, it was forced to invest in cash reserves to pay employees and suppliers and to keep things cool. When restrictions are lifted, the company inevitably sees an influx of orders, but with a 60 day payment term, it is now struggling to make up the difference until the money is returned to the bank.

During my banking days, I could probably offer these customers an overdraft or one-stop loan. Now that we are working with Complete Commercial Finance, we have access to even more options including invoicing, refinancing and special financing. Creditors. In reality, the business world cannot stand still and must be open to exploring other ways to create working capital in the current situation.

The government’s Corona Virus Business Interruption Loan Program (CBILS) and Loan Program (BBLS) are providing support for many businesses this year. In late September, Chancellor Rishi Sunak’s Winter Economic Plan extended CBILS and BBLS loans from six to ten years and introduced a Pay As You Grow option to provide greater debt flexibility and an interest-only deferred option for six months. Repayment without affecting the creditworthiness of the company.

There are exciting steps out there, but it’s important to think long term. Last month we worked with a client who used BBL but used the funds to buy equipment during the summer. Due to late customer payments, the company suddenly had difficulty with cash flow and needed to borrow to cover monthly operating expenses. Although we were able to obtain business loans, these short-term borrowing costs were higher than the 2.5% late fee for BBL which would ultimately cost the company more.

We are in uncharted waters with COVID-19 and we are only beginning to understand how lenders consider CBILS and BBLS loans when assessing a company’s financial condition.

The examples above show how a short-term outlook can affect long-term outcomes. It has never been more important to seek professional advice and use the ear and deep understanding of trading finance experts like us to get the most out of it.

While unfortunately we live in uncertain times and know that you have taken all the measures to protect your company’s financial future, this is definitely the best way to tackle the challenges that many companies will face in the months to come.

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10 mortgage lenders have developed the market as a whole

The top 10 mortgage lenders remained unchanged in 2018 both in terms of gross loans and outstanding mortgages. This is based on data from UK Finance’s largest mortgage lender.
Among these, these banks controlled 82.4% and 82.2% of the market share, respectively; This is an increase from 80.4% and 82.1% in 2018.
At the top of the list for 2019 and 2018 is Lloyds Banking Group with a mortgage loan balance of £ 286.4 billion and a gross loan value of £ 46 billion in 2019.

Lloyds Banking Group alone holds a 17.2% market share in gross lending and 19.7% in mortgage lending.
The rest of the top 10 on both lists include: Nationwide Building Society (£ 189.8 billion and £ 33.7 billion, respectively); Santander (£ 165 billion and £ 30.9 billion); NatWest Group (£ 147.5 billion and £ 33.5 billion); Barclays (£ 142.7 billion and £ 24.9 billion); HSBC Bank (£ 96.7 billion and £ 20.1 billion); Virgin Money (£ 59.5 billion and £ 9.3 billion); Coventry Building Society (£ 42.1 billion and £ 8.6 billion); The Yorkshire Building Society (£ 36.7 billion and £ 7.8 billion); and TSB Bank (£ 28.9 billion and £ 5.9 billion).
Outside the top 10, it is mostly occupied by big, established names, however, there have been some notable changes in the rankings.

Skipton Building Society increased gross lending from £ 4.1 billion to £ 4.6 billion, up from 13th to 11th on the list.
Meanwhile, Topaz Finance increased its mortgage value from £ 11.2 billion in 2018 to £ 18.3 billion in 2019.
Legal & General Home Finance also saw significant increases in mortgage value from £ 3.1 billion to £ 4.2 billion and over £ 2.2 billion to £ 3 billion.
Metro Bank fell from £ 4.2 billion to £ 2.3 billion a year, down from 12 to 16 on the list.
Lloyds Banking Group also topped the list for the value of mortgage loans to buy and sell (BTL) – at £ 48.6 billion, although that’s down from £ 50.57 billion in 2018.
However, in terms of BTL’s gross loan value, BTL is ranked second by the Nationwide Building Society. Here Nationwide is up from £ 4.48 billion in 2018 to £ 6.6 billion in 2019, compared to a drop from £ 5.53 billion to £ 5.02 billion for Lloyds.
Although the key players in the top 10 BTL mortgages remain pretty much the same, there have been significant moves across the rankings.
The top 10 lenders who increased their gross loan value at BTL in 2019 include Barclays (£ 3.89 billion to £ 4.13 billion), Santander (£ 2.33 billion to £ 2.47 billion) and the NatWest Group (£ 1.36 billion to £ 2.08 billion). ).
Lenders to this group who cut their gross value on BTL loans include the Coventry Building Society (£ 3.82-2.8 billion) and Virgin Money (£ 2.26-1.88 billion). , Paragon (£ 1.58 to 1.47 billion) and Leeds Building Society (£ 1.32 to 1.16 billion).
In terms of BTL market share in 2019, the top 10 lenders on the list held 74.6% by gross loan and 73.2% by mortgage; This compares to 75.2% and 72.4% in 2018.
In 2019, gross borrowing was £ 268 billion, 0.3% lower than 2018; Gross borrowing for loan purchases was £ 42.2 billion, up 4.2% for 2018.
Loans allocated on the BTL market increased by £ 1.1 billion and in the overall market by £ 0.4 billion. Bank lending increased by £ 2.7 billion and £ 7.5 billion, respectively.

Overall, construction and intermediate lending declined in both markets – construction companies by £ 1.1 billion in BTL and £ 1.8 billion in the full market and intermediate lenders by £ 0.8 billion and British Pound 3.5 billion, respectively. .
Calum Bilbe, data and research analyst at UK Finance, said: “One possible explanation for this growth in the big banks is the decline in lending from direct competitors that coincides with the introduction of ring fencing in early 2019.”
He added: “In short, fencing means that by early 2019, the UK’s biggest banks will have to separate their main UK banking business from other banking activities (eg investing).
“With retail banking in the UK limited, there are a number of things banks can do with money from borrowers’ deposits.
“Because average savings are higher than loans, these large lenders have used excess retail savings in ring organizations to increase mortgage lending.
“This surge in mortgage supply has helped significantly lower the average cost of new mortgages as larger construction companies and mid-sized lenders compete with the largest banks to attract borrowers for their products.
“In addition, larger lenders can use the Internal Rating Based Rating (IRB) to weigh capital (as opposed to the standard small firm approach).
“This further lowers the costs for larger creditors by helping lower prices.
As a result, under the Standard Approach, smaller lenders make it more difficult to compete in mainstream markets where restrictions and IRBs allow the largest firms to dominate market share.
“This does not reduce the diversity of the mortgage market as specialist lenders continue to expand in market segments that require manual credit, such as self-employed customers or customers with more complex incomes.
“Large and sometimes medium-sized companies are less competitive in this segment because their largely automated systems cannot find the right approach to these loans.
“Overall, despite the largest bank market share with many different types of lenders, the mortgage market remains competitive and meets all borrowers’ needs.”

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