Management matters even during CV19: businesses led by strong directors with focus on prudent financial management have weathered the CV19 storm better
The quarterly Lending Monitor issued by government-appointed platform Funding Xchange is highlighting the importance of good management in steering businesses so that they can emerge relatively unscathed from the current pandemic.
The Covid crisis has disrupted businesses across all sectors, with some sectors like Hospitality and Education, disproportionately impacted. Yet, even in the most challenged sectors, there are survivors emerging who have managed to strengthen their position during the crisis. Amongst these are 7% of hospitality businesses that have seen a better performance than before the crisis. And an astonishing 40% of hospitality businesses that are reporting no impact as result of the crisis – despite repeated lock-downs.
Many of these businesses that are doing well share one critical asset: the directors have prudently managed their personal finances and have a good personal credit score. The strong correlation between a high personal credit score and the likelihood of a business reporting not to be negatively impacted by CV-19 holds through all phases of the crisis. An implication being that a director who manages their personal finances diligently has a positive influence over the financial strength of the businesses they control.
This suggests that funders are doing a disservice to UK businesses by defining sector exclusions, where some industries, such as hospitality, are seen as too risky. Given that these businesses’ positive trading performance makes them ineligible for government-backed lending, many of these high-performing businesses have limited options to access funding.
Funding Xchange suggests that the recovery of the business landscape requires lending institutions to take into account the specific circumstances of individual businesses and directors. Digital eligibility journeys that use rich background data provide funders with the ability to assess proposals with real-time data and support targeted lending. Recognising the impact that government-backed lending has on the overall market, Funding Xchange is also calling for greater emphasis to restore market-based lending that supports flourishing businesses.
Co-founder and CEO of Funding Xchange, Katrin Herrling says, ‘The crisis very clearly shows the need for intelligent screening of loan applications to identify attractive lending opportunities. Opportunities can be hidden in challenged sector such as hospitality, where we are seeing strong performers struggling to access funding. The perception from lenders can be that these are a high-risk sectors – but the story is much more interesting. We are seeing cohorts of strong businesses emerge that have successfully adjusted to the crisis due to strong management. Unfortunately, the government schemes are not seeking to support these businesses. As market-based solutions are being re-introduced, we are working with banks and funders in helping them analyse specific opportunities for new lending and managing their existing portfolio. Seeking to build strong, resilient portfolio can be consistent with supporting businesses in the most challenged sectors as they exit the lockdown.”
Full details of the Lending Monitor available at: