If 2020 was the year when companies learned some hard lessons about resilience, then 2021 is going to be defined by how well management teams can apply them to ready their business for an upturn. We might know when that will be, or how it might settle down for different sectors, but there’s a recovery coming and we need to be ready.
That was the main message from ABN AMRO’s virtual round table, Flexible Finance for an Uncertain World. ABN AMRO Commercial Finance UK’s Head of Sales, Jeremy Harrison spent 40 minutes in conversation with Gareth Stanger, Group Operations Director at Recruitment Investments, and Ross McDonald, Head of Debt Advisory and Partner in Corporate Finance at BDO to discuss what business had learned from a year of lockdowns – and how they might plan for an uncertain year ahead.
Getting ready for… whatever is next
The legacy of lockdown could be grim for some sectors. But the panel is already picking up on positive signals in the broad economy. “We are a barometer – the temporary labour market is an early-warning mechanism,” said Gareth Stanger. “And the labour shortage we’re seeing will feed through into the broader market. It’s all about finding the candidates for us right now – not trying to find vacancies to fill.”
All our panellists were clear that management teams that can provide a little extra forecasting reliability will boost their options to raise finance – ready for any recovery. “We’re seeing an increased polarisation of lender appetites,” said Ross McDonald.
“Borrowers must prepare and articulate their credit story – and spell out the risk mitigants – to lenders. If you can make the job easier for a lender and their credit committee, your chances of the right type of finance are greater. The number of lenders, and the flexibility of options, is so much better than after the financial crisis, taking the time to understand them and which best suits what you’re trying to achieve is the real win.”
Change creates opportunities. Yes, it comes down to the sector, the business and the mindset of the management team “But coming out of this recession there are so many more funding options than coming out of the last one,” Ross McDonald stressed.
And for Jeremy Harrison, the way ABL works means when companies do spot opportunities at the base of the up-slope of a V-shaped recovery, they should be able to take it. “That’s where ABL works well: it’s already a very flexible product,” he said. And it’s largely untapped. Not a lot of people know about it.”
So what can management teams do to be ready for 2021 – whether that’s more stop-start lockdowns or a rapid V-shaped recovery in key sectors? Our panellists had clear advice:
Stick to your (strategic) guns. “Whatever your strategy was pre-Covid, whatever your dreams for the business were, stay with them,” said Gareth Stanger. “It’s not like the banking crash, it’s not a long-term economic shock. It’s a health crisis. And that will be resolved at some point.”
Diversify away from orphan sectors. Hospitality, High Street retail travel are likely to take much longer to heal from Covid-19. “Find ways to steer towards markets and activities that will do well,” said Stanger.
Understand your options. “There are more sources of finance now than there ever have been,” said Ross McDonald. Don’t assume you have no recourse if the bank denies you an overdraft.
Prepare your story. However you’re raising finance, a convincing plan that can stand up to challenges is key. “Make it easy to sell your credit story to a lender’s credit committee,” said McDonald.
Don’t constrain your thinking. If your sector or business does bounce back sharply, don’t assume that finance will be a barrier to making the most of it. “There is capital out there that needs to be put to work,” said McDonald. “If you can articulate your funding objectives and give that bit of clarity on forecasts, you should be well positioned to raise capital to fund your plans .”
Get good advice. Some businesses have the time and experience to explore financing options themselves. “But most people are much more focused on running their business, especially if they’re looking to pivot in hard-hit sectors, than finding a financier,” said Jeremy Harrison.
Pick out the positives from the lockdowns. 2020 has been a dark time; many businesses have been hurting. But having to adapt in tough times brings lessons, too. “In our own business, we learned that we can make decisions quicker,” said Jeremy Harrison. “We’ve moved away from laborious meetings now. We’re capturing what we’ve had to do differently – and keeping it where it’s actually been better.”
Overall, then, the message is simple: we’re not back to any kind of predictable status quo just yet. But as 2021 begins, there is light at the end of the tunnel. Businesses that have shown through 2020 that they have the resilience and adaptability to succeed – and have learned the lessons of a tough year – can get the funding their need to react quickly when things pick up. Opportunity knocks in 2021.
Learn more by watching the roundtable discussion CLICK HERE