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Wednesday, October 23, 2019

Opinion > Aldermore

Flexible finance solutions to counter Brexit uncertainty

Chris Meldrum, national business development director at Aldermore | 08:59 Wednesday 25th September 2019

Since the EU referendum in June 2016, businesses have been looking for clarity over what the future will mean for operations such as pricing, availability of goods and exchange rates.

Many SMEs hoped that a deal would be reached with the EU, helping to ensure a stable and smooth transition. However, if we leave without a deal, this could create significant issues for many businesses and lead to a rise in demand for finance products. 

Finance providers, brokers and advisers all have a role to play in assisting businesses, helping them to find effective and practical solutions to some of the issues Brexit could bring.

One particular phenomenon is stockpiling. Businesses are understandably concerned about the cost and availability of raw materials from the EU in a no-deal situation, with many consequently buying up stock in advance.

Stockpiling has been most evident in the food and manufacturing sectors. Ultimately, any sector that relies on importing from the EU could be affected.

The issue that stockpiling creates is a simple one of cash flow. Businesses face the need to spend large amounts of cash in advance to buy goods and materials that won’t generate revenue for potentially months. Dormant goods in a warehouse are not only expensive to store and insure, but also tie up working capital.

Invoice finance remains an effective solution to the problems that stockpiling creates because it quickly releases cash into the business and enables clients to access up to 90% of their outstanding invoices, often within 24 hours.

At Aldermore, our clients run it, we help keep it running and we are seeing a trend whereby clients have moved from asking us what facilities would theoretically be available, to now asking if these facilities can be implemented. By painting a picture of a business’s balance sheet and its assets, we work to create a bespoke working capital facility that they can drawdown on and control in the way that best suits them. 

As a result of the uncertainty surrounding Brexit, and the possibility of a no-deal outcome, stockpiling is an issue which has impacted businesses across the spectrum, regardless of sector. Due to our in-depth understanding of businesses flexible financial needs, we are able to support SMEs through this uncertain Brexit period, consequently helping businesses achieve their needs and objectives.

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