Businesses take a longer-term view on finance
One interesting trend we are seeing as a result of Covid-19 is that many SMEs are now taking a longer-term view when it comes to financing their business growth.
Before the pandemic, growing businesses in the UK enjoyed access to a wide array of unsecured and secured funding when they needed it. As a result of lockdowns and the halt in trading this caused many businesses, many lenders reduced or even paused lending, leaving government-backed schemes (CBILS, BBLS and now RLS) to plug the gap.
Many who used the government’s Coronavirus Business Interruption Loan Scheme (CBILS), which was originally interest free for the first 12 months, are now having to repay these loans. With interest rates sometimes in the region of 15% and maximum terms of 6 years on term products, these are not only costly but can create a significant cash-flow burden from the monthly repayments. As business confidence continues to grow in 2021, many have come back to the lending market to try and find longer term and more flexible alternatives.
The problem for many is that over the last 18 months a lot of lenders have maintained a reduced appetite to lend. The FSB reported that credit availability in Q2 2021 had fallen to levels last seen in Q1 2020, SMEs have seen their options for borrowing reduced and those looking to borrow from usual sources have had to turn to other options for funding their businesses.
Unsurprisingly, Selina Business is now seeing many businesses come to us with a longer-term view on their financing needs. More business owners are open to leveraging their own personal assets in order to secure cheaper, flexible funding and achieve sustainable growth for their business.
This has become even more important in a macroeconomic environment where supply-chains are strained and staff shortages are high. Many businesses have seen 30% increases in operating costs last quarter.
These dynamics are all creating growing demand for Selina’s Business Credit Facility. The facility is secured on a residential property and has a maximum 30-year term – this means we are able to offer considerably better rates than unsecured lending: starting from 4.5% per annum and averaging around 6-7% mark.
We provide business owners with a strong combination of flexibility and stability. For the first 5 years our loans work in a similar way to a bank overdraft, giving them the ability to draw down funds when they need them. At the end of those five years, they have the option to instantly convert it to a term loan facility of up to 25 years. This helps keep down monthly repayments as low as possible.
It’s been an incredibly challenging period for SMEs, and many have had to rethink the way they do business, including how they fund their growth. I believe at Selina Business we are well positioned to support business owners looking for long term solutions for a post-pandemic world.
Joshua White, Business Lending Lead at Selina Business