Business Finance - We are living in a ‘Recovery Culture’

June 2008

The first few months of 2009 will be remembered as a period of significant financial turmoil as the impact of the global credit crunch has been felt across the worldwide financial system. The impact on business finance for small and medium sized businesses has been felt in the past few months with liquidity becoming an increasing challenge.

The good news, however, is that the ‘recovery culture’ that has been established over the past 10 years or so, now seems to be fully embedded within the financial services sector. Institutional lenders are generally receptive to sensible recovery solutions and will not simply ‘pull the plug’ at the first sign of trouble. The bad old days of the late 1980’s and early 90’s seem to be well and truly behind us.

It should be noted that we also have to give the government credit where it is due and say that legislation and the attitude of HM Revenue & Customs (HMRC) has played its part. Their supportive and more flexible remit has seen them being prepared to agree repayment proposals when arrears have built up. Although HMRC don’t like transactional taxes (VAT/PAYE) being used to fund working capital requirements, they will often allow businesses the opportunity to trade their way out of a difficult period – plus there is little incentive to crystallise a ‘loss’ when a recovery plan looks viable.

We have also seen the emergence of specialist firms that provide effective recovery solutions for distressed businesses. These are not traditional Insolvency Practitioners but firms made up of experienced professional advisers who look to put recovery plans in place. These can often include the introduction of new ‘business angel’ investment, which provides the financial catalyst for ‘real’ recovery.

The emergence of the internet and the availability of information online have also positively impacted on the ‘recovery culture’. This can often be the route to find the specialist help and services that are needed when financial distress is encountered – asking your accountant or bank manager is no longer the only option.