This blog forms part of a series where we identify common views and trends within the broker market over the previous 3 months.
General market feeling is that overall level of enquiries from new and existing clients has remained relatively static. Some (43%) have seen an uptick in the number of Invoice Finance requests. One response stated, “Selective Invoice Finance and Purchase Order Finance to be the products of most interest.” On the flipside another broker has not seen “many Invoice Finance enquiries, but mostly loans to replace existing loans by way of consolidation.”
On average 71% of broker deals are looking for Invoice Finance. Of those, 48% are new to this type of funding.
With regards to new vs. existing clients; the market opinion seems to be split: one broker quoted “brand new to market enquiries severely lacking and very difficult to obtain” whereas another had “most of [their] requests are from new clients.”
One response mentioned an increase in those looking for more exotic export locations.
Just under 1/3 of brokers noted an increase in the size of credit insurance limit requirements. Some marked increase in large concentration risk. 14% have conversely seen lower invoice value, funding requirements and loan requirements.
All of the respondents receive enquiries from a wide variety of sectors. Some sectors have seen an increase including:
Whether talking about resources, supply of materials or cash flow, all of the responses were consistent on the top 3 issues facing SMEs. These were the common themes of shortage, uncertainty, and increased risk.
Of note, is also the difficulty for SMEs and brokers to obtain bad debt protection limits against their debtors. This is partially due to the pandemic and struggle over the last 12-24 months which has negatively affected credit scores.
With a lack of unsecured lending, there is mutual concern around whether SMEs will be able to service ongoing or up and coming orders and have safe growth. This led onto similar comments around the withdrawal of government schemes. Cash flow will be tighter as the Bounce Back Loan Scheme and CBILS start to be paid back. Wages will also have to be paid now that furlough support is over.
As of August 14, 2021, approximately 11.6 million jobs, from 1.3 million different employers were furloughed in the United Kingdom as part of the government’s job retention scheme.
All responses spoke of tough times ahead with significant cash shortages. There is anticipation that those who were not in “sufficient shape” pre-pandemic would likely fail within 6-12 months along with zombie businesses. Consequently, a surge in the number and frequency of insolvencies is expected, this is even with the recent changes in legislation.