Let’s Talk Business

How should I prepare for Brexit and possible changes to trading arrangements?

The situation is changing very quickly, but businesses can still plan ahead. It is critical that you consider not only the impact on your own businesses, but also on your customers and your suppliers. 

You might want to consider breaking down the key potential impacts into three broad areas:

1. Trade (supply chains, exporting, tariffs)

2. Financing (tax/VAT, access to finance, direct receipt of EU funding)

3. Staffing

The potential implications for your business are likely to differ depending on the formal arrangements for the UK’s exit from the EU. Consider scenario planning to assess the potential impacts and what you might need to do to respond.

The latest UK government advice can be found at www.gov.uk/euexit. Your business trade associations may be able to provide further sector-focused advice and guidance, take a look here.

We strongly recommend using the resource links on this website. If you need to speak with a finance provider, about your current requirements, or any potential future needs, it’s best to do it as early as possible.

How are businesses like mine preparing?

Whatever the size of your businesses, it’s important to consider and respond to upcoming change. Even if you don’t export or import directly, you may be involved with customers and suppliers who will be affected. 

There is a variety of advice available from business groups – you’ll find a summary at the bottom of this page. In particular, you may find the Federation of Small Businesses' Brexit Portal, the British Chambers of Commerce's Brexit Hub and the CBI's Brexit Guide useful resources.

My business might need finance or I might need to discuss my existing finance needs in light of these upcoming changes. What should I do?

Lenders retain the capacity and commitment to support viable businesses, so you should feel confident in approaching your finance provider, or others, if you wish to discuss finance needs. It’s best to do this as early as possible.

If your primary lender cannot provide the finance you have requested, remember there are many alternative options at this stage and another lender may be able to support your business.

My business bank is an EU-based bank. Will I need to change banks?

Please note that this does not apply to UK high-street banks with foreign parents such as Santander.  If your personal or business banking is provided by a UK-based branch of an EU/EEA bank, we do not expect any issues in the short term. This is due to contingency measures proposed by the Bank of England and the UK government for a period of up to three years after 29 March 2019 (subject to some usual conditions on cooperation between your bank’s national supervisor and UK supervisors).

If you are banking directly with a bank based in other EU/EEA countries, your ability to continue accessing your facilities will depend on the individual position of your EU/EEA based bank. We recommend that you contact them as soon as possible to discuss your individual situation.

If you are banking with an EU/EEA-based bank that operates through a UK based subsidiary, which includes a number of the main high street banks, then it is not expected that there will be any issues, even after these arrangements end.

I am an EU/EEA-registered business accessing banking services from a UK-based bank.  What do I need to do?

We do not expect any immediate issues. However, you should discuss your arrangements and needs with your bank. 

After leaving the EU will SME debt financing be more restricted?

We do not expect that leaving the EU will have a material impact on the availability of finance for most SMEs. Most financing for SMEs is currently provided by UK-based banks and other product providers.

Nonetheless, the Bank of England and the UK government are planning for a three-year period during which EU/EEA banks operating in the UK can continue providing services subject to arrangements between the Bank of England and their national supervisor. In light of these, and as long as the business meets the other criteria of the specific lending provider, there is no reason why leaving the EU would have a material impact on the availability of finance for SMEs in the UK.

Several banks have also confirmed they will be making funding available to support SMEs and address short-term cashflow issues arising from potential disruption to supply chains caused by the UK’s departure from the EU. UK Finance is working with members to coordinate communications to support confidence in access to finance.

If you are a UK-based business financed by an EU/EEA-based financial service provider, or an EU/EEA business being financed by a UK-based service provider we advise you to contact your financing provider.

My business relies on European Commission funding.  What happens after leaving the EU?

The EU has some SME financing programmes which will no longer be available if the UK leaves the EU. Many organisations, including UK Finance, are urging the government to institute similar schemes. Further information will be made available as soon as the EU and UK government provide further clarity. 

What happens if it takes me longer to get paid by customers in the EU or my cash flow is disrupted?  What should I do?

Businesses concerned about cash flow issues should speak to their financing provider(s) as soon as possible to discuss what products and support may be available. These options may vary depending on your circumstances, it could be a applying for or extending an overdraft, a working capital loan or other sources of finance such as invoice finance.

It might also be sensible to consider payment practice more broadly, for instance whether your payment terms are still appropriate, whether they are clear enough and whether you should consider tools such as the Small Business Commissioner to take action against poor payment practice of your customers. 

Invoice finance allows businesses to use the debts owed to them by their client businesses (as represented by their invoices) to release funding immediately instead of waiting for payment.  Invoice finance can usually unlock around 85 per cent of the value of an invoice straight away, with the balance (less the financier's fees) paid when the invoice is settled. In addition to invoice finance, asset based lending can release funding against wider assets, including stock, inventory, work in progress, plant and machinery.

Many invoice finance providers will also provide sales ledger management services and can support clients in making sure that they get paid. In addition, bad debt protection can be provided as well as funding, or invoice finance can complement a client’s existing trade credit insurance facility, unlocking working capital as well as helping clients manage their payment risks and do more business.

I sell goods to the EU and get paid in euros. How will I be affected?

This will depend on your banking arrangements. If you are receiving euros (or other EU/EEA currency) into a UK-based account, and are a UK-resident firm, we do not foresee any issues. UK-based banks will still be able to receive payments in EU/EEA currencies the same way they receive payments in other currencies (e.g. the US dollar, or Japanese yen).

If you are a UK resident business but receive your euro payments through an account with a provider based in the EU/EEA, your ability to continue accessing the account will depend on the position taken by your service provider. We would therefore recommend that you contact your service provider for more information.

The ability of firms based in the EU/EEA to access UK-based financial services will depend on their local national regulation and we recommend that they contact their UK-based finance provider for more information.

It should also be noted that, in addition to the sales ledger management and bad debt protection services that can be provided with invoice finance, funding can often be made available in a range of currencies to fit with the customer’s needs.

My business uses invoice finance and has EU trade customers. How will I be affected?

It is not expected that Brexit will cause any particular problems for the provision of invoice finance or asset based lending. Indeed, many invoice finance providers are preparing to enable them to provide increased levels of funding to their current and new clients, to support them through any short-term economic uncertainty. We do recommend that you contact your finance provider to discuss any concerns that you may have, however.

I need to make payments to suppliers in the EU. How will payments be affected?

UK-based banks and other service providers will continue to be able to make payments in different EU/EEA currencies. However, in a no-deal scenario, UK-based payment services providers would lose direct access to central payments infrastructure – such as TARGET2 and the Single Euro Payments Area (SEPA) – meaning customers (including business using these providers to process euro payments) could face increased costs and slower processing times for euro transactions. The government is looking to align payments legislation to maximise the likelihood of remaining a member of SEPA as a third country. This would ensure lower value euro transactions are processed in the same amount of time as they are today.

If you are a UK-resident business but make your EU/EEA payments through an EU/EEA-based account, your ability to continue accessing the account will depend on the position taken by your provider. We recommend that you contact your EU/EEA-based finance provider for more information.

The ability of EU/EEA-resident firms to access UK-based financial services will depend on their local national regulation. We recommend that they contact their UK financing provider for more information.

I buy goods from the EU and pay by card. Can I still do this after the UK leaves the EU?

Card payment systems are globally inter-operable and when the UK leaves the European Union, cards issued in the UK will be dealt with in the same way as debit or credit cards currently issued by issuers internationally.

In other words, the card schemes do not rely on mutually-agreed regulations or trade agreements to function. The international card schemes set the operational rules for card payments between payment providers (including banks) and retailers, not only within the EU, but around the world.

Post 29 March 2019, cardholders across the EU/EEA can expect to continue using their debit or credit cards domestically and overseas with the same ease of use as they do today.

However, if you are a UK-based client using an account provided by an EU/EEA service provider, or an EU/EEA client using an account provided by a UK service provider, we recommend that you contact your service provider.

I am concerned by movement in foreign exchange rates.  How do I protect my business?

There are a number of options for businesses to mitigate the risk of adverse foreign exchange movements. Banks and finance providers have a variety of products which may assist. Further information on these options can be provided by contacting your finance provider.

How do I access finance for exporting?

The financial services industry supports businesses with international trade daily in many ways, by providing working capital, financing capital goods, helping customers to identify export and inward investment opportunities, making international payments and offering pre and post-shipment financing. This will continue post-29th March and banks and other finance providers stand ready to support your needs. Your usual contact points will be able to either advise further or refer you to relevant colleagues to discuss support for you. Government guarantees through UK Export Finance may also assist and your bank will be able to help you navigate your various options.

As well as your main bank, there are a range of finance providers and types of finance, with the available options becoming significantly more diverse in recent years. Decisions on finance applications can often be quicker than you might expect, particularly if you have taken independent advice from a chartered accountant or an independent business advisor, so you should hear promptly whether your application has been successful.  

Figures show that banks approve around eight out of ten applications for SME finance. However, it’s important to remember that they have an obligation to lend responsibly and there are times when a proposal does not meet a bank’s lending criteria, for example, due to affordability or past credit history. In some cases, providers may make an offer that is different to the amount and type of finance applied for, which a business then chooses not to accept. In other cases, there might be other types of finance that are more appropriate to the circumstances of a business, whether these are provided by a bank or another finance provider.

To increase the chances of a successful application, it’s vital that your business plans and projections are comprehensive and realistic. They should demonstrate that you know your market and understand your costs. If your business has a troubled history – such as adverse data (bankruptcies, CCJs) – then you must be transparent about what went wrong and demonstrate that you have put in place measures to ensure you now have a clean record.

Banks base their decision for a credit application on the information supplied by the business. The most common reason a loan application is not approved is because the bank is concerned a business might not generate enough money to be able to afford the loan repayments.

Five top tips for getting a ‘yes’:

1. Develop a robust business plan: It is crucial to demonstrate your business’ financials and show that you can repay a loan. Your plan should demonstrate you know your market and competitors and highlight when you expect to start to bring in money.
2. Build financial understanding: To be successful you must understand your numbers, in particular, turnover, profit and existing debts, and show how your business will manage the credit it is asking for. Clearly outline why you need the money and your plan for repayment. Research or work with a business mentor to ensure you know what makes a sound balance sheet and cash flow projection. You can look to work with mentors through the Mentorsme portal - www.mentorsme.co.uk
3. Check your track record: Banks will take into consideration how you have managed your finances in the past, so it is important you know your credit rating and understand the elements that might affect it. This can be done through credit reference agencies. If you believe your credit rating is incorrect or inaccurate you should challenge it through your bank or the credit agency used.
4. Be honest: Do not underestimate how much money you will need. If you need to return to the bank and request further funds, it will be more expensive. It may also affect the lender’s confidence in your ability to manage your company finances. Do not over-forecast revenues or undervalue the costs you will incur. Be honest about any reasonable living costs you will need to take out of the business.
5. Keep dialogue open: Communicate often and clearly with your bank and seek feedback on your lending applications. A ‘no’ now may not mean a ‘no’ in the future. Ask your bank how you could adjust your business model to help secure funding and what elements of your plans may need further consideration.

If your bank lending application is unsuccessful, there are several options which may be available.

1. Appeal

If you’ve applied to your bank for finance and you have been turned down, you can lodge an appeal on the Better Business Finance website. You must submit this within 30 days of your original application, and you will need to meet certain eligibility conditions as explained on the website.

The following banks are part of the appeals process: AMC, Barclays, HSBC, Lloyds Bank, Bank of Scotland, RBS, NatWest, Santander, Ulster Bank, Bank of Ireland, Danske Bank, Clydesdale Bank, Yorkshire Bank and First Trust Bank.

2. Referral to Government Designated Platforms

If a small and medium sized business makes an unsuccessful loan application to a designated bank, the bank is obliged to offer the business a referral to the government-designated online finance platforms, subject to eligibility. These platforms aim to help firms find a suitable finance provider that may be willing to offer the required finance.

3. Finding Finance Tool

If you’ve been unsuccessful in applying to your bank for finance you could try the finding finance tool on the Better Business Finance website.

This tool brings together a wide range of finance providers across Britain, including business angels, regional funds, government schemes and banks. The free and easy to use search engine allows businesses to refine searches according to their geographic location, the industry in which they operate, the amount of finance they require, and the life stage of their business.

4. Responsible Finance providers

If your business needs a simple and affordable loan and your bank is unable to help, try a responsible finance provider. There are responsible finance providers all over the UK, lending to businesses, social enterprises (and individuals) providing finance that is fair, support and advice. Find your nearest responsible finance provider at http://www.findingfinance.org.uk/

It may be easiest to contact your bank or finance provider through your usual channels.  However, below are a summary of major lenders’ contact points.  This directory will be expanded in the coming weeks.

There is a range of business group information and advice online, including member-only advice. There is also government information in place, including the British Business Bank Finance Hub.

Sector-specific advice may be particularly important for certain sectors. Below are details of available support.  Further advice and guidance is also available to members of relevant trade associations.