25 August 2021
In a recent poll of the lending community* by audit, tax and consulting firm RSM, an overwhelming majority of respondents (94 per cent) anticipate there will be an increased demand from businesses for financial support over the next 12 months predominantly to fund growth.
The results show there will be further demand for funding as businesses emerge out of the pandemic and look to expand, diversify or pivot towards new markets and audiences, as 82 per cent of responses thought that lending will be used to fund growth, and 63 per cent for acquisitions.
However, half of the responses (50 per cent) expect to see an increase in demand to fund restructurings as businesses continue to feel the negative effects of the pandemic, or need to reset to recover effectively.
Unsurprisingly, 94 per cent of lenders expect to see an increase in corporate insolvencies over the next 12 months, as Government support ends and the reality of current levels of exposure start to cause business distress.
Greg Moreton, head of debt advisory at RSM, said: ‘The pandemic has shown the resilience of the middle market; but it has been hard for some. Emerging from the pandemic will see a real mix of growth and restructuring. However, it’s encouraging to see that the majority of lenders expect more businesses to be looking for financial support for growth and acquisitions, which will play a key role in driving the UK’s economic recovery.
‘It is worth noting over the last 18 months corporate insolvencies have remained low as the continued provision of furlough, deferral of crown debts, and rent moratorium meant companies have been able to manage their working capital more effectively. Government policy will continue to dictate the levels of corporate insolvency for the foreseeable future, but unsurprisingly the majority of lenders expect to see a significant increase in corporate insolvencies over the next year.
‘This period of change has created challenges and opportunities in equal measure. Lenders are clearly optimistic there is an opportunity for the middle market to strengthen its prospects; however, lenders must be aware of the accelerated change that businesses have had to adapt to. The need to improve the borrowing experience is now crucial, and specialist lenders who are able to differentiate their services will be a driving force in the market.’
*RSM conducted a survey of 107 lending professionals across high street clearing banks, specialist banks, asset-based lenders and private debt funds, to assess the lending appetite of the UK market, the opportunities and challenges ahead and how this compares against lending during the peak of the pandemic.