What directors need to know

The Treasury and Department for Business, Energy and Industrial Strategy have established a new business finance council that will specifically support small and medium-sized businesses. 

It will be chaired by the Business Secretary, Andrea Leadsom and John Glen, economic secretary to the Treasury and will also include representatives from a number of major banks and lenders. 

It’s not expected that ministers will seek formal guarantees from banks and institutions that they’ll lend specific sums in the event of a no-deal Brexit but that working capital facilities be maintained even in extreme circumstances. 

The now-infamous Operation Yellowhammer planning would also provide emergency funds to companies that found themselves in financial distress as a result of difficulties caused by an abrupt no-deal departure. 

The council would perform a similar function to Project Merlin, an industry-wide 2011 initiative when banks guaranteed to lend to hard-pressed businesses. 

The British Business Bank has an Enterprise Finance Guarantee (EFG) of £300m in place. The EFG facilitates lending to viable smaller businesses that lack sufficient security against which to borrow. They provide existing lenders with a government-backed 75% guarantee against the outstanding facility balance. 

The BBB also maintains an additional government supported fund called the Enable Guarantee. The facility supports additional lending capital. 

Will support be enough for SMEs?

Andrea Leadsom said: “Our financial system is strong and banks have the capacity to lend. I would urge lenders to take advantage of the support on offer from our fantastic British Business Bank.”

Small businesses could be forgiven for wanting extra assurances that there will be credit lines available. 

Mike Cherry, chairman of the Federation of Small Businesses said: “While the council is undoubtedly needed, it requires direct input from firms on the ground to understand how best to support small and medium-sized businesses through a possible no-deal Brexit.

“If we do suffer from a downturn in the months ahead – as a number of forecasters predict – we need reassurances that the banks are not going to turn off the taps for small firms as they did during the financial crash.

“We emerged from the crash with thousands of small business banking horror stories. We can’t have those same mistakes repeated.”

While Brexit continues to create uncertainty in every sector it can cause otherwise well run and viable businesses into difficulties not of their making. 

If you’re worried about what the short and medium term future holds for your company, get in touch with us today

Our expert advisers will set up a free initial consultation to go over your current position and to help you identify any weaknesses and issues that can be shored up and strengthened before sooner or later, Brexit becomes a reality.