And while there has been a lot of polarising speculation in the news of it being a great opportunity and the worst thing that will happen. The truth as always will likely fall somewhere in the middle. However, we can make an educated guess by looking at past economic events to see how our economy will affect businesses in the UK.
With 2008s financial crisis, we saw high street banks withdrawing many established businesses right to an overdraft in the face of uncertainty. We also saw high street banks making it almost impossible to raise capital due to their stricter underwriting process. This undoubtedly limited growth for many businesses.
In this scenario, experience teaches us many things, but mainly, underexposure and reliance of one credit source are bad for business in times of uncertainty. The solution, of course, is to have a greater exposure and history with multiple lenders.
Should one financer decide that your industry is ‘too risky’ to lend to. You can smile happily knowing that you needn't worry - as you have access to a portfolio of credit lenders happy to take your business. Allowing you to capitalize on the new business opportunities that Brexit may bring.
Many businesses are unaware of the SME alternative lending market, which will serve as a lifeline to future proofing your business post-Brexit. With it, alternative lending promises unique ways of raising working capital, without the ‘bureaucratic no’s’ many high street lenders supply.
The alternative lending market works by granting UK businesses access to a portfolio of mainstream lenders, many of whom are based outside of the UK. You could see greater access to working capital from established foreign banks (based in Europe, Australia, Asia & America) and even challenger banks for more complex lending agreements.
One of the many benefits of working with an alternative lender post-Brexit, is they offer the consultancy of what local bank managers used to provide. This extra familiarity with your business, its operations, and unique challenges - help them to identify the right finance solution for your businesses objectives.
Not only that but due to the extra freedom to pick and choose financial solutions and lenders. You can feel confident knowing your broker is choosing the best solution for you and their decision isn’t biased by any product targets high street banks may hold.
We can also safely assume that our currency will fluctuate in value (as it has been already). However, this fluctuation will undoubtedly see our currency as being heavily deflated in value. This could see an increase in private equity and global Peer to Peer (P2P) lenders looking to capitalize on this deflation with investments.
Private equity is of course, the process of selling part of your company's shares in exchange for working capital. This could have a buy out clause or be an ongoing deal where your equity investor shares in your companies profits.
P2P lending can also take the form of private equity or as a secured or unsecured loan. As the name suggests, it is a network of private investors from around the world who pool their money together to raise the capital that you require to keep your business growing.
The benefits of using P2P lending and private equity is the more relaxed underwriting process. These types of investors are more interested in your business's story and plan for growth. Rather than looking at credit ratings, they take a humanistic and commonsense view of lending to businesses.
A deflation in currency value could also mean a greater interest in UK goods and services. With international buyers having an urge to see greater value for their money. This would result in UK businesses exporting more of their products internationally.
As we mentioned earlier how it was important not to be underexposed to just one credit source. Being underexposed to the markets you operate in is also a bad idea. Look further afield, and not just at the other English speaking countries.
The UK has a strong credibility of producing quality goods and with that, there is global interest and demand. Look for ways to make your website more accessible in multiple languages. Use paid advertising to test different markets around the world for your products and find out if you can capitalise on the deflation of our currency.
Equally important, it may make business sense to explore forex before Brexit happens. Transferring capital into a stronger currency such as the US dollar or the Japanese yen, before reverting back to the pound post-Brexit.
Alternatively, cryptocurrencies could be another solution as there are no forex transfer fees. Sure, they’re also a volatile currency. But, if you look at their value, year on year, then you can see they’ve been growing in value and may too serve a function for keeping your business afloat.
In summary, when addressing how Brexit will impact your business you need to focus on four areas. Continued business growth, business resilience, market opportunities and external risk factors.
Financial brokers can help you with your business growth and resilience through our ability to secure your business finance, post-Brexit. We offer free initial advice and are happy to discuss your objectives and offer financial solutions to achieve these objectives.