Stephen Deakin, Chief Executive – BCRS Business Loans
A West Midlands based lender believes that businesses across the region are now starting to focus on growth and recovery following a challenging year but warns that interest rates must remain low for this to be achievable and that CDFIs will continue to play a crucial role in delivering business finance.
Stephen Deakin stepped up to the helm of alternative lender and CDFI BCRS Business Loans in April 2020 during a period of intense uncertainty, just as the world was beginning to lock down and businesses were plunged into the unknown.
Although BCRS had been supporting businesses unable to access traditional finance for over 18 years at this point, nobody could have predicted how vital their offering would be during the pandemic – a time when many businesses were simply fighting to survive and many lenders were retreating into the shadows.
Thankfully for businesses across the West Midlands, BCRS, like many CDFIs across the country, pledged its support from the very start of the pandemic and offered new payment plans to all of its existing customers that were being impacted by Coronavirus.
CDFIs – or Community Development Finance Institutions – are finance providers dedicated to supporting individuals and businesses that are unable to access finance from traditional lenders, such as banks. CDFIs lend for social and economic impact rather than for profit and deliver funding into some of the poorest areas of the UK to encourage sustainable growth.
As an existing delivery partner for the British Business Bank’s Enterprise Finance Guarantee Scheme, BCRS was in the first cohort of lenders delivering the Coronavirus Business Interruption Loan Scheme (CBILS), which was introduced by the government to support the continued provision of finance to UK SMEs during the Covid-19 outbreak.
BCRS went on to deliver over £16.4 million via CBILS, which closed for applications on 31 March 2021. This not only supported 165 businesses when they needed it most, but also protected 2,077 local jobs and helped to create an additional 383 jobs.
As a lender that’s incredibly close to the local business community, Business Influencer Magazine asked Stephen to reflect on what has been a very challenging year.
He said: “It has certainly been an interesting 16 months to say the very least. The demand we experienced is like nothing we have ever seen before. To put it into perspective, our lending increased by 47 per cent in the last financial year alone; at a time when our small but mighty team of 17 also had to transition to working from home and rapidly implement new technology to support a virtual Covid-safe application process.
“As a lender who supports small businesses on a daily basis, I have always believed that the West Midlands region is home to some of the most resilient businesses in the world – and the past year has proved that.
“The government-backed funding schemes available during the pandemic resulted in businesses having a wider variety of finance options available to them than ever before, with much more favourable terms and eligibility criteria.
“In fact, after the Bounce Back Loan Scheme (BBLS) was launched we found that our average loan size increased, as those requiring smaller amounts were better suited to that scheme.
“My hope is that businesses now have the working capital needed to help propel recovery, innovation and growth as our economy continues to uncoil.
“Despite the challenges posed by the pandemic, it is encouraging that not all of our lending in the past year has been used to support survival, which is testament to the entrepreneurial spirit we ooze here in the West Midlands where obstacles are turned into opportunities.
“We saw a number of funding applications to support management buy-outs, demonstrating the confidence investors have in the future, and many businesses requesting funding to enable them to pivot their activity to meet changing market conditions.
“Instant examples that spring to mind include a training provider delivering courses online rather than in person; a packaging wholesaler that started supplying the fast-food industry during the pandemic after recognising the boom in demand and even an office partitioning company that used its experience and expertise to develop isolation pods that meet NHS standards for infection control as a rapid response to Covid-19. It is businesses such as this that make me incredibly positive about the future, despite the current circumstances.”
The Focus Is Now On Recovery & Growth
“The closing of the CBIL scheme on the 31st March 2021 saw the huge demand for finance subside somewhat. From my perspective, it appeared that most businesses had secured the finance they needed for the time-being. Plus, restrictions were starting to be eased as part of the government’s Coronavirus roadmap, with many businesses hoping to see turnover increase as a result.
“Since going live as an accredited delivery partner for the Recovery Loan Scheme (RLS) in May 2021, we have seen demand rise again, but at a much steadier pace. This is a positive sign in itself as it suggests that businesses are generally in a much better position financially.
“Further reassuring news is that the loan applications we’re receiving indicate that businesses are now sourcing finance to spearhead growth and recovery plans; some picking up from pre-existing plans that had to be shelved due to the outbreak of Coronavirus and others that have developed completely new plans for growth. Both bode well for the weeks and months ahead.
“The increase in business confidence we are witnessing at BCRS has been reinforced by recent results from the Lloyds Bank Business Barometer which found that business confidence remains strong at 33 per cent, after a five-year high last month¹.
Financial Outlook & The Future
“Many people are wondering what the future looks like, especially in relation to the role interest rates and inflation will play in helping our economy recover.
“Recognising that the Bank of England has an incredibly difficult job, our view is that increasing interest rates in the short term would stifle recovery and limit the affordability of capital to support growth. While many lenders, including BCRS, may offer fixed interest rate loans, raising interest rates would impact the ability for many businesses to repay existing variable rate debt taken out under government support schemes.
“In terms of inflation, it is my view that the significant rise we have seen recently is the result of a perfect storm of global demand significantly surpassing supply as the world opens up again. We are also comparing prices now with suppressed prices a year ago when we were in the first lockdown. I am hopeful that rising inflation will be relatively temporary though.
“If interest rates remain low and the economy continues to open up as planned, I think we can expect significant economic growth over the next 12 months, which in turn will mean that more companies look to access finance.
“As we recover, if past recessions are an indicator, it is likely that many lenders will tighten their credit appetite. This is where BCRS, other CDFIs and alternative lenders will become increasingly important. By taking a flexible and human approach to lending, we will deliver vital funding to businesses when they need it most to ensure we are able to build back better following the pandemic.
“As a final piece of advice, it is really important for companies to keep on top of their cash and regularly update their forecasts to ensure they don’t over-trade and have the working capital required to support growth in turnover. As we unlock further, I believe we may well see an increased need for shorter-term funding,” concluded Stephen.
To discover more information about BCRS Business Loans and how it is supporting the growth and recovery of businesses across the West Midlands with loans ranging from £10,000 to £150,000, visit www.bcrs.org.uk.
BCRS is an accredited delivery partner for the Recovery Loan Scheme (RLS).