Helping SMEs on the next stage of their journey

With businesses looking for flexibility in finances, Close Brothers Commercial Finance is ensuring it combines local knowledge with expert financial knowledge

Paul Stephens, head of corporate & ABL at Close Brothers Commercial Finance

As SMEs and businesses come out of one turbulent period, the Covid-19 pandemic, and into global economic challenges, you’d be forgiven for thinking the mood is pessimistic.

Yet optimism is the common thread among SMEs. Much has been made of the resilience of these businesses, but while it’s helpful, there are still challenges around working capital and finances.

That’s where Close Brothers Commercial Finance has helped businesses out on the ground. Working with a range of SMEs and small corporations, it offers financial services such as asset finance, invoice finance and asset-based lending (ABL).

ABL combines cash released from unpaid customer invoices and other assets on a company’s balance sheet, allowing a company to raise higher levels of working capital.

The purposes range from facilitating short-term cashflow to helping them update their equipment to supporting an acquisition or MBO (management buy-out) or MBI (management buy-in).

With people out and about again, Paul Stephens, head of corporate & ABL at Close Brothers Commercial Finance, said that after a couple of challenging years, the Irish business sector has shown its resilience.

“We can see it from our asset finance division; the demand from our client base is strong,” he said. “They’re optimistic about the future and looking for asset finance to support their plans.

“Some are utilising our sale and HP back facility to raise the equity they need to purchase new equipment. It works by releasing equity tied up in existing vehicles and equipment on a business’s balance sheet. There’s also a demand for new equipment and to fuel growth.”

That optimism and activity can be confirmed on the ground by a recent survey Close Brothers carried out.

Of the businesses surveyed, 39 per cent expressed confidence that the economy would continue to grow over the next 12 months, even if at a slower than anticipated rate. Likewise, 36 per cent of businesses expect to expand over the next twelve months.

On the flip side, 29 per cent of businesses said it was a significant challenge to access funding and an additional 35 per cent described it as a moderate challenge.

Stephens said many businesses he had spoken with alluded to changes in the financial landscape, with many needing to source a new funding partner. This is crucial as the challenge in sourcing working capital is being felt in different areas.

“How that’s materialised on the ground for many SMEs we work with is longer lead times in their supply chains,” he said. “What’s compounding that again is slower payments by customers on the other side so they’re getting squeezed at both ends.

“Some suppliers are looking for payment upfront because of the lead time so we’ve seen businesses come to us for asset-based lending, which has proven very popular over the last six to 12 months.”

The final stat from that survey is that 37 per cent of businesses believe they have missed a business opportunity due to a lack of finances. The reasons can vary between companies, but Stephens said it highlighted the high demand for funding and knowing that it was available.

Essential to supporting businesses in Cork is that they have a local office, which was opened in 2015 and is staffed by those who understand the region’s nuances.

For Stephens, it’s about more than just offering finance; it’s ensuring that companies are understood. Having the framework for financial services is essential but knowing why and finding ways to help is fundamental to its service.

“Understanding local businesses is very important,” he said. “Our people get the nuances of what’s going on in Cork in a way that maybe somebody located elsewhere may not. Yes, they can do the lending but they don’t always understand subtle distinctions associated with the region.

“Our asset finance team are regularly out visiting businesses, be it walking the factory floor or popping in for a cup of coffee to see how things are going.

“It’s not a specific commercial requirement but you’re building up that knowledge of their business. You know what’s coming down the road because you had an early engagement with them.

“We’re able to structure the right type of facility for them because we have that relationship with people on the ground. We can create something bespoke.”

The other benefit of having close ties relates to Close Brothers’ locations across the island. The organisation has offices in Cork, Dublin, Galway and Belfast as well as funding experts across the country.

“Where lots of other funders may have become entrenched and centralised, we have regional offices,” he said. “The fact that it’s all-island means you get that cross-border expertise.”

That means that if a business in Cork is also operating in Belfast, Close Brothers Commercial Finance can connect them to people on the ground there, which can be a major help, especially post Brexit when there are different regulations to take into account.

It all comes back to knowing the people and environment and that’s something Stephens believes gives it the advantage over other lending organisations.

“It’s surprising, but often when we’re walking the factory floor with people, you could see something and that leads to [another opportunity for that business],” he explained. “Those hands-on elements guide us to the right solutions for people.

“Having that local presence in Cork is hugely important. Our team is expanding all the time, and the activity levels in the region continue to grow. That’s a big thing for us and something we’re really focused on.”