Post-lockdown dangers – is over trading now a risk to your business?

After a period of reduced trading as a consequence of lockdown measures, businesses now face the challenge of recommencing operations in an environment where social distancing will pose inevitable labour challenges, and supply chains also need to be reassessed to understand whether they remain intact.

Pleasingly, for many businesses across multiple sectors, customer demand has returned with vigour and perhaps the hidden threat of over trading lurks.

Over trading

Over trading is a term used to describe a business which trades at a level which it’s resources cannot support, typically associated with a period of aggressive growth.

This is a real challenge as markets reopen and is compounded by the inevitable working capital contraction which has occurred during recent months. Coupled with suppliers demanding prompter payments and a drift in credit payment by some customers, this could pose a serious issue and business owners should keep a watchful eye over their cashflow and general balance sheet capacity.

Other finance availability

Whilst banking markets appear challenging, with the majority of lending continuing to be funnelled through government backed arrangements, it is also wise to consider other finance availability.

Current schemes reliant upon government guarantees are now closely nearing their end point, with the autumn potentially a troublesome period where these schemes will no longer remain ‘open’ and a large portion of mainstream lenders remaining reluctant if not entirely closed for new business opportunities.

Planning for this and the cashflow requirement of your business should therefore be underway now, with financial advisors again being useful to those who may wish to seek finance options through alternative sources.

Raising debt finance

We understand that sourcing the capital needed to grow your business can be a confusing, time consuming and often expensive endeavour.

Our Corporate Finance team are frequently engaged on such matters, acting as sole advisor or in partnership with specialist brokers to support finance raising processes.

Contact us

MHA Tait Walker have access to over 100 lenders via our brokerage platform and also work with specialist brokers and lenders covering a range of fields including working capital, asset, property and alternative funding. If we can help assess your options on a consultative basis please do let us know. Such assistance can be provided on a free of charge basis as you consider your options and may well prove to be incredibly useful as the UK economy begins to re-ignite.