We asked Nick Richardson, Head of Funding at Capitalise, to share an update about what he’s currently seeing in the lending market and how Capitalise is adapting to the changing needs of businesses.
The New Normal
With the Bank of England raising interest rates for the 10th time over the last year, we're now seeing the Bank Rate at 4%, the highest level it's been in 15 years. Borrowing costs for two million UK mortgage customers with variable rate or tracker mortgages are going to see immediate rises.
We still have access to some unsecured lending products but they have more specific criteria, are usually very short-term and more expensive. If this is essential for one of your clients, ask your Partnership Manager for more information.
Here are two types of business groups which we have been trying to support over the last few months:
Client example A
We know that the higher the credit score the company has, the lower the interest rate on any borrowing should be.
However, lenders have responded to base rate increases by also increasing their interest rates. Whereas earlier last year we were seeing single digit rates offered often, later in the year even the strongest businesses were being offered facilities with double digit rates.
So we looked to other lenders and products, where the business could offer some additional strong security. Lenders in the secured market take less risk on lending and so are able to quote lower rates. For some companies, this may be an ideal solution for them and allow them to access the finance they need to spur their business on.
Client example B
Companies which don’t have many years of trading history usually have the lowest credit scores. Inevitably, these are the businesses which lenders find the most risky, and they may not meet the credit hurdle to even be offered any terms.
To help combat this, we have sourced more lenders and products which specialise in this market. So if you have clients who are at an early stage, encourage them to consider how access to more working capital could help them to grow faster.
These products may be shorter term than more traditional lenders, from 3 - 24 months. And the repayments may be more often than monthly, perhaps weekly or even daily. For some businesses this allows them to budget cashflow better and could be more aligned to their revenue model, so it may fit their needs perfectly.
We’re here to help
We continue to strive to meet the needs of our accountants and their clients, no matter which way the market turns.
Capitalise for Business allows your clients to understand how to influence their own credit score. This is the best way to ensure a favourable response from lenders.
If you have any clients who are having cashflow struggles, the sooner they take action, the more choices they will have.
Speak to your Partnership Manager, or contact firstname.lastname@example.org and we can help identify the most appropriate solution for them from our panel of over 100 lenders and expert funding specialists.