Thought Leadership

The role of independent funders post pandemic

During the pandemic, independent funders were as much affected as any other business. Alongside the furloughs, the remote working, the hybrid working and the long lockdowns, there’s been a fundamental shift in the industry, heralded by government lending.

At Rivers, we have always been strong supporters of salons and the wider beauty industry; one of the most heavily affected sectors during the pandemic, but one experiencing a phenomenal bounce back in demand post-lockdown. At a recent event, Rishi Sunak himself commented: “The beauty industry is the best of British business: you are creative, entrepreneurial and innovative – no wonder you are worth £30 billion to the UK economy.”¹

Now that we are all coming back together, we are still here and ready to provide more support than ever before, with more service news to come imminently and with a new Business Development Manager joining us as well.

We view the coming period as one of great opportunity for the lending industry. However, it’s one that requires us to think ahead about the changing landscape and our collective role within it – as funders, and as brokers – to ensure strong and stable growth and development.

Unintended consequences of government loans

In the short term, some funders still find themselves playing second fiddle to government backed loans. The scale of this government lending began last year with the Bounce Back Loans and the Coronavirus Business Interruption Loan Scheme (CBILS), which gave companies in various degrees of distress the facility to borrow large sums of money but without giving personal guarantees and sometimes at relatively low interest rates. That signalled a change in the industry and in the mindset of SMEs and might be thought of as taking around two years of trading out of the normal marketplace for independent funders.

Having come to an end on 31st March 2021, CBILS has been replaced with the Recovery Loan Scheme (RLS). It continues the unintended consequence² of government aid, limiting the finance sector when it’s trying to get back to normality.

However, RLS isn’t as easy to access as CBILS was, and it does begin to take the cost of lending back towards commercial rates. In fact, when you get right into the details of it, the premium that customers pay for the government guarantee means it isn’t as cheap to the end user as it first appears.

The future of aviation is strictly tied to several factors

Not if but when?

Even so, RLS is another form of competition that many lenders didn’t previously have. So, what’s our role in a post-pandemic world?

As with all things, we mustn’t think that government lending is going to last forever. It’s a reasonable assumption that a government of any ilk will not want to carry on subsidising borrowing in this way. We already know that RLS will stop taking applications on 31st December 2021 as things stand.

That leaves us with a discussion around when, rather than if, independent lenders need to step into the gap, especially as traditional banks are currently showing some reticence to pursue the type of aggressive lending behaviour you might typically have expected around now.

Thinking ahead

While our industry is one that often has to deal with algorithms and numbers, relationships and trust have always played just as important a role in the work that brokers and lenders do.

While it is a competitive arena, it’s also a vertical one, where we all support one another’s success. However much data and digital equipment we can acquire, to assess risk and probabilities, those business relationships still remain integral to the work that we do – both relationships with customers and relationships with one another.

Customers have become used to cheap government loans, but these loans will cease. The world will recover, more commercial rates will return, and brokers will again find more of a need for the independent funders who have always been there for them in the past and who want to continue to be there for them in the future.

If ever there was a time to be thinking ahead, this is it and at Rivers we certainly have been.

¹https://professionalbeauty.co.uk/site/newsdetails/chancellor-rishi-sunak-beauty-industry-essential

²https://www.ft.com/content/0789daa6-db4e-4523-91a6-c9f4f1d9dbb1