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Our impending exit from the European Union (EU) has created a challenging and complex commercial environment for UK businesses, but one immediate threat is the potential for working capital shortages.

The factors that could affect cash availability for businesses are wide-ranging and include border delays, supply chain collapse, and problems collecting debts. Mitigating the risk of these possibilities becoming reality, therefore, is a matter of urgency.

So how is your working capital prior to what may be the final chapter of the Brexit saga, and what can you do to help your business navigate these unchartered waters? RBR Advisory has industry-wide experience and can provide expert guidance on managing working capital prior to the Brexit deadline and post-Brexit.

How might Brexit affect working capital?

Delays at the borders

Border delays are a major concern for many businesses, and could severely affect lead times. The subsequent delay in bringing cash into a business if border restrictions are applied, or checks cause severe backlogs, could create considerable financial difficulty whilst also having a knock-on effect to other supply chain members.

Supply chain disruption

If import and export costs increase following Brexit it would reduce working capital availability, and potentially the stability of entire supply chains. This could leave contracts unfulfilled and create crippling uncertainty around the delivery of goods and supplies to customers and other businesses.

Debt collection

The ability to collect debts efficiently might be compromised by issues such as the border delays mentioned earlier, or simply general market upheaval due to Brexit. If cash incomings are reduced it can quickly cause financial decline, and ultimately insolvency if emergency measures aren’t taken.

Stockpiling goods

Many businesses have stockpiled goods and supplies since the referendum in 2016, with a view to minimising disruption when we leave the EU. This will already have placed extra pressure on their working capital, but it could lead to a severe shortage of cash if the predicted outcomes of a no-deal Brexit materialise.

"RBR Advisory has industry-wide experience and can provide expert guidance on managing working capital prior to the Brexit deadline and post-Brexit."

Additional funding from the banks

The Business Finance Council (BFC) has been established to help smaller businesses access vital funding post-Brexit. Council members include representatives from banks and the alternative lending sector, but unfortunately there’s no representation on the council from the business community itself.

The premise of the Business Finance Council is to ease the borrowing process for small and medium sized businesses, and reduce the likelihood of cash shortages across the board. It’s important for businesses to communicate with their lenders prior to the Brexit deadline, however, to identify if and when help might be needed, and obtain an indication of whether it could be provided.

Lenders may be encouraged to a degree by the provision of a guarantee from the British Business Bank. The Enterprise Finance Guarantee (EFG) is offered to financial institutions to encourage lending in non-standard circumstances such as these. The government backed scheme guarantees 75% of eligible lending between £1,000 and £1.2 million – typically to businesses that don’t meet lenders’ requirements regarding security.

Refinancing and professional advice

RBR Advisory can assess your working capital situation and potential exposure to risk both in the period running up to Brexit and beyond. We’ll present your best options for refinancing if necessary, or for shoring up your cash reserves in advance of the Brexit deadline.

If you would like more information on your working capital situation, please contact our expert team. We’re a major part of Begbies Traynor Group, the UK’s largest professional services consultancy, and offer free same-day consultations to quickly establish your needs.

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