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The financial landscape for businesses post-pandemic

With many of the government’s COVID-19 business support schemes slowly coming to an end, businesses will need to adjust to new ways of finding working capital. Access to Finance specialist, Ian Dixon, reviews some of the options ahead of PROGRESS21.

The government’s COVID-19 business support schemes have provided much-needed backing throughout the last 18 months, but with some now ending, businesses need to adjust to new ways of finding working capital.

“Investors want to see business owners who are being pro-active when it comes to accessing the support and the funding that’s out there,” explained my colleague and head of Access to Finance, Phil Hargreaves, during an online webinar in June considering the financial landscape for businesses post-pandemic.

“So don’t sit there and wait to be spoon-fed by an investor because it’s not going to happen,” he advised.

Three months on, and many of the discussions are still pertinent ahead of PROGRESS21, one of Greater Manchester’s first large scale in-person business events taking place at Manchester Central in September.

 

Hear from experts about the impact of the pandemic on business finances and the options available to business owners who are looking to raise capital in a post COVID world. 

Register now

Equity booming

While many Government-sponsored schemes are now drawing to a close, post-pandemic funding is still available, while private equity investment is booming. According to the most recent equity market update from Beauhurst, a record £10.7b was invested during the first half (H1) of 2021, more than double the amount raised during H1 2020, and an 84% increase on the previous record in H1 2019. In total, a record 1,296 deals were announced, with 384 companies securing their first equity round, a 52% increase from H1 2020.

Among the key Government-backed initiatives still available is the Recovery Loan Scheme, explained Melanie Ellyard, a senior manager at the British Business Bank. The scheme is open until the end of the year, with loans of up to £10 million available through a network of accredited lenders.

There is also support for companies that took out a Bounce Back Loan but have concerns about repayments, she continued. This is the thinking behind the Pay As You Grow options, which offer more time and flexibility to repay loans.

Although not a scheme as such, Jordan Dargue, an angel investor and investment director at NorthInvest, urged businesses to look at R&D Tax Credits, which companies can claim against specific projects, and which can help ease cash flow problems.

Start-up Loans also remain crucial as a way of stimulating the recovery, said Melanie, by unlocking the talent which will ultimately help boost the UK’s economic recovery.

The flexible, unsecured loans have proved a lifeline to young entrepreneurs, she explained, offering an important way to secure funding without having to take on a lot of debt. They also include 12 months of support from a mentor and since 2012, over 80,000 have been issued.

But Phil was also conscious that some businesses are struggling with debt as a direct result of the pandemic and advised them: “not to stick their heads in the sand if they have got issues, but to speak to a trusted advisor.”

Blended finance

A key change in the investment landscape, continued Phil, is that companies are adopting a blended approach to finance. “It’s about drawing funding from different areas and pulling them together into a coordinated package,” he said. This includes equity investment, and Jordan explained that there was plenty of evidence that investors were actively seeking new opportunities again.

She also echoed Phil’s comments that they are looking for founders who have had the creativity and determination to get their businesses through the pandemic. “These are the businesses you want to back because they show such maturity,” she said.

Phil also commented that after years of being considered too fragmented, angel investment is adopting a more joined-up approach across the regions. “As business has gone virtual, geography has become less important,” he said. “Historically investors have looked to invest in local businesses so that they can adopt a more hands-on approach, but this is changing as so much more business is now conducted online.

“This is stimulating investment from outside the region into the North West and is something that businesses looking for funding should think about tapping into.”

Raising capital post-pandemic

These are among the topics that will be covered during The Cash Crunch, a session at PROGRESS21 dedicated to looking at ways of raising capital in a Post-COVID-19 world. A second session – Investment for Growth - will look at what interventions and developments are needed by both public and private sectors as the UK economy looks to get back on track. This will further explore new investment trends that have recently emerged along with key topics around the funding scene locally, regionally and nationally and what this could mean for businesses.

Planning and restructuring post-pandemic also came under the microscope, with advice that businesses need to make sure they are still fit-for-purpose as the country opens up again. “It’s not necessarily about pivoting and creating a whole new business model, but more about thinking what you can do better,” said Phil.

A few ideas put forward included more local supply chains, making sure that debt is properly managed, and keeping control of cash flow by not paying for things that the business doesn’t really need.

Melanie also suggested that: “You can’t rely on the old ways of doing things anymore – financial forecasts, five-year business plans - for a lot of businesses these have all gone out of the window.”

And Jess Jackson, investment director at the GC Business Angels, added: “As a founder, you need to know your numbers and be on top of the figures. There is no point relying on your accountants for this because you need to know what’s happening today, not two months ago, to be able to make the right decisions.”

Bringing greater diversity to investment

The panellists also discussed ways in which access to finance could be made more inclusive. According to the Annual Investing in Women Code, just 15% of applicants to Government products are women, while the Cornerstone Report: Access to Venture Capital points out that just 3% of venture capitalist funded founders in the UK identify as black.

Jordan is one of the founders of Fund Her North, a collective that helps female entrepreneurs find investment but also links them into additional support such as mentoring. She is also leading a drive to recruit more female angels, which women entrepreneurs often find more approachable. Currently, just 15% of angels are women.

Mel pointed to the work of the Investing in Women Hub in demystifying funding and helping women to both start and scale up their businesses. And with research showing that women are less likely than men to know other entrepreneurs, one of the aims of the Growth Hub’s Peer Networks is to bring more businesswomen together.

“With the Government backing plans to increase the number of female entrepreneurs by 50% by 2030, the whole issue of a more inclusive investment ecosystem is now well and truly on the radar,” added Jess.

“Of course, lots of barriers still exist, but there is support out there to help women and minority-led businesses overcome them.”

If you are based in Greater Manchester and want to learn more about the post-pandemic funding landscape, new investment trends and financial tools available to future-proof your business don’t miss PROGRESS21 Business.

PROGRESS21 is one of the first face-to-face business events in Manchester for over 18 months and takes place at Manchester Central on September 23.

Register now

Ian Dixon

Ian Dixon, Senior Business Advisor - Access to Finance

Ian is responsible for the management and development of the Hub’s team of A2F specialists. He is a chartered accountant with extensive corporate funding experience and knowledge, developed predominantly within the SME market. Former commercial roles have included financial director, process improvement director and business development director, and he has acquired an in depth knowledge of various forms of finance, including all types of debt and equity, and the processes involved in raising funds.

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