Full-speed ahead or obstacles in the road?

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In the aftermath of one of the world’s most turbulent trading periods John Clarke, Head of Direct Sales from Wesleyan Bank, considers the impact on the funding landscape and how alternative finance can help businesses thrive in uncertain times.

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As we tentatively edge towards emerging from the pandemic, businesses are turning their thoughts from survival to growth. However, the speed of recovery will hinge on their ability to obtain finance to buy new stock, purchase equipment and invest in technology.

Driven largely by the use of the government loan schemes, banks have been deluged with applications for external financial support over the last 12 months. Demand for funding in 2021 is once again expected to soar, but it remains to be seen whether appetite for lending will match the ambition of SMEs that are seen as pivotal green shoots to drive the UK’s economic resurgence.

Some doors may close

The recent budget announced that from April the new Recovery Loan Scheme (RLS) will replace the Coronavirus Business Interruption Loan (CBILS) and Bounce Back Loan (BBLS) schemes.

It is anticipated that the lending criteria for RLS loans will be more stringent than its predecessors. Borrowers will once again need to demonstrate pre and post-Covid-19 business viability as part of their application, which is a key reason why acceptance rates for CBILS (around 44%) are much lower than BBLS (around 75%).

While CBILS lenders have provided significant support to their customers, this may come at a cost to their appetite for growth finance in 2021. The slower repayment terms of CBILS loans in comparison to normal debt cycles will stretch liquidity for several financial institutions and lead to them curbing their lending in some sectors.

Traditional high street banks are also seeing an unprecedented level of demand being placed on their existing book. As a result, some are scaling back support for new lending to existing customers due to concentration concerns, even if those businesses can demonstrate they are creditworthy.

Other doors will open

Thankfully, there is currently a thriving alternative finance market with flexible funding options that many businesses have yet to explore.

Accessing new innovations can be expensive but forward-thinking SMEs do not have to be left behind. Tailored and flexible asset finance solutions from commercial finance providers offer funding for a wide range of specialist equipment, associated IT software and services, in addition to office refurbishments. As a result, businesses no longer have to pay for new investments in one lump sum.

By using finance, instead they can spread the cost in predictable monthly instalments (usually over one to five years) to preserve vital working capital without compromising their existing banking lines with their day-to-day business bank. Businesses can also reap the rewards from the equipment before they have finished paying for it and potentially leverage tax relief benefits, accelerating their return on investment.

Moving on up

Despite difficult trading conditions, businesses can take comfort that alternative lenders are willing to support sectors to capitalise on substantial market opportunities. Three industry sectors in particular could thrive in a post-pandemic world.

Construction – the pandemic inflicted massive disruption to UK construction but the sector has adapted well following the initial shock. Supported by the government’s focus on increasing housing supply and transport infrastructure, a gradual but sustained recovery is anticipated for the next two years. Operators implementing the HS2 railway project are seeing huge demand, whilst firms not involved in HS2 are enjoying a similar boom to fulfil other projects and may require finance for new equipment.

Manufacturing – UK manufacturing has been less affected by restrictions on activity, but growth is being hampered by Brexit trade barriers and raw materials shortages. Nevertheless, manufacturing will play an essential part in re-building the economy and many plan significant investments in boosting productivity and agility. Finance will be key to enabling manufacturers to restock their capital equipment base which was put on hold last year and take advantage of the opportunities from digital technologies.

Transport and logistics – the UK logistics sector was booming even before the pandemic and its significant growth acceleration is set to continue. Businesses specialising in cold logistics are extremely buoyant but are operating in highly competitive supply chains. They are likely to increase their investment in refrigeration and freezing equipment to maintain the quality and shelf life of products, whilst integrating renewable and low-carbon technologies as part of the drive towards net-zero carbon emissions.

Finance has an instrumental role to play in helping SMEs to invest to shape their future. However, businesses should be mindful that banks which have supported them during the pandemic with emergency finance might not be prepared to increase their exposure limits going forward.

It’s therefore important to explore all available funding options and speak to alternative lenders who can demonstrate specialist market knowledge, greater flexibility and a committed appetite to support businesses going forward with tailored finance solutions.

While the economic outlook may be uncertain, there is cautious optimism that better times are around the corner. Businesses who are able to invest now for the long-term should emerge as being more financially sustainable to capitalise on new revenue streams and returning customer confidence levels to prosper in the future.


Wesleyan Bank provides flexible finance solutions for businesses, supporting their cash flow and growth objectives. To find out more visit the website www.wesleyan.co.uk/commercial or call 0800 980 9348 (Mon-Fri 8.30-5.30pm)

Wesleyan Bank acts as both a broker and a lender.

Wesleyan Bank Ltd (Registered in England and Wales No. 2839202 VAT number 487282114) is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No.165116). Wesleyan Bank Ltd is wholly owned by Wesleyan Assurance Society which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Incorporated in England and Wales by Private Act of Parliament (No. ZC145). Financial Services register number: 110873. Registered Office for the above Group companies is: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352.

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