Published: July 14, 2020
James Whitaker, Unity Trust Bank’s Regional Director for the Midlands, reflects on the impact of the Coronavirus pandemic on borrowing, and considerations for businesses as they plan their economic activity for growth after lockdown.
At Unity Trust Bank we have seen sustained, double digit growth in the number of borrowing enquiries since the start of the Coronavirus pandemic, not just for refinancing but also share and property purchases. We have committed £11m of capital to Community Development Finance Institutions to enable them to deploy CBILS to SMEs, and we’re looking to agree a further £7m to support strong interest for increased requirements.
Nothing has fundamentally changed in terms of our credit approach to lending, but we would expect proposals to include up to date detail of financial and operational changes which have impacted a business or its sector. Due to practical issues, such as social distancing, it can take longer for some transactions to complete. For example, visiting a care home to complete a valuation or signing legal paperwork at solicitors can result in additional complications in the current environment. However, because all our lending customers are relationship managed, businesses have been able to seek support and guidance quickly, be that an extension of facilities, capital repayment holidays or new borrowing.
With the interest base rate at an unprecedented low, it continues to be a cheap environment in which to borrow money and we’re continuing to offer finance repayable over 20 years. For some businesses, it is going to be a challenging time to consider refinancing at the moment, particular those in sectors highly impacted by the crisis, such as hospitality, retail and leisure. Where customers are in severe financial distress, our role is to do as much as we can to support them, and to signpost them towards grants and other financial support to enable them to adjust to the economic impacts of Coronavirus.
On the other side of the coin, there are a number of businesses that have moved very quickly to pivot and adapt, resulting in new opportunities. As we saw in the last recession, some have realised new areas for growth that may otherwise not have been considered. The pandemic has also highlighted the need for businesses in the healthcare sector to be well supported, and this is aligned to an expansion of our funding this year for the dental and retail pharmacy sectors, where we have completed a number of transactions during the pandemic.
As we move out of lockdown, businesses will need to continue to be prudent and focus on cash. They should plan and forecast for where they want to get to, and what they will need to do if there is a continuation of difficult circumstances. For example, you don’t have to be in the middle of financial stress to request a capital repayment holiday.
With the phasing out of the furlough scheme, and deferred repayments on loans and VAT to be considered as businesses move into next year, many will be facing increased outgoings. It’s important to plan ahead carefully and consider options for repayments, engage with your accountant, HMRC and your bank. At Unity, we welcome this approach with open arms as it enables us to support our clients much more quickly.