CLOSE BROTHERS COMMERCIAL FINANCE: OVERCOMING THE CHALLENGES OF RISING COSTS

Businesses are confident about the future despite rising costs impacting cash flow, the Close Brothers Business Barometer suggests.

The survey, which canvassed the opinions of 900 senior SME decision makers in April 2023, found that 54 per cent of Irish Business leaders were confident that the economy would continue to grow, an increase of 11 per cent compared to this time last year. Overall, 90 per cent also believe their company will perform well, either expanding or broadly staying the same over the next twelve months.

However, many flagged the impact that rising costs are having on working capital. Nearly a third of decision makers said that managing costs is their main priority this year. The issue of late payments continues to be challenging. Regardless of how organised a company’s finances are, or whether they raise invoices on time, it is likely that at least some of their bills will be settled outside of agreed terms – something that the increase in costs has arguably made worse.

Of course, managing cash flow is vital for business success and, as a result, many are turning to solutions like invoice finance to ensure they have access to the capital they need.

It’s simple. Companies receive a percentage value of their unpaid customer invoices from a lender in advance. Then, when the invoice has been settled, they are paid the remaining amount minus an agreed fee. Those looking to raise larger levels of funding are using asset based lending, which blends invoice finance with funds released against other asset classes, such as stock, property or plant and machinery. For some, Sale and HP back is an ideal form of refinance that can be used against most types of equipment, making it suitable for companies of all sizes, including sole traders. It works by selling an asset and leasing it back on a standard HP agreement, providing a valuable cash injection or equity towards new asset finance.

Paul Stephens, Head of Corporate & ABL, said: “It is hugely encouraging to see high business optimism as we come out of the challenging period caused by the pandemic. The situation over the last two years has been tough, but the resilience and innovation we have witnessed first-hand has been impressive. Businesses have become more dynamic as they offset disruptions to labour shortages, delivery delays or scarcity and move away from a model of ‘just in time’ supply chains to ‘just in case’.

However, to navigate the near-term, it is vital that SMEs have access to the funding they need to thrive. Our specialist asset finance, invoice finance and asset based lending teams continue to work closely with SMEs to ensure they can access the working capital they need.”

Close Brothers

Close Brothers is a leading modern merchant bank, recognised as a FTSE250 company and listed on the London Stock Exchange. We provide lending to a range of companies, with a core purpose of helping the people and businesses of Britain thrive over the long term.

To achieve this, each of our diverse, specialist teams have a deep knowledge of the industry sectors and asset classes we serve, so we can understand the challenges and opportunities they face. We support the unique needs of our customers and clients to ensure that they thrive, rather than simply survive, whatever the market conditions.