Warning over ‘perfect storm’ on funding
Scottish businesses are being urged to review their funding needsbefore a“perfectstorm” as government support for companies starts to unwind.
Corporate finance expert Alan Hamilton of accountancy and business advisory firm Johnston Carmichael said many businesses will have higher levels of debt and liabilities after taking advantage of support schemes put in place during lockdown.
As initiatives such as deferring tax payments and furloughing start to come to an end, Hamilton said firms must act now to ensure they are financially robust for the future.
“We are now officially in recession and a perfect storm of liquidity headwinds is looming as government support unwinds,” he said.
“Unfortunately, these changes are taking place against a backdrop of declining revenues and profitability for many businesses as a result of the pandemic.”
He said businesses need to assess options to generate cash, and to identify any potential funding gaps over the coming months and beyond.
“For example, you may require additional cash flow to support working capital as the economy recovers and demand for your product or service grows or need to invest in equipment or machinery.”
Hamilton advised firms that do need access to additional funding to undertake thorough financial planning and forecasting before approaching lenders.
“Banks need to see that you have a well thought-out business plan which takes account of the impact of Covid-19.”