Covid-19 has resulted in a period of accelerated change for many industries resulting in widespread uncertainty. As a result risk averse lenders are taking a more cautious approach to many requests for funding.
Unsettled business owners are considering ways that they can exit their business or extract some value and these market conditions create an opportunity to match investment opportunities with equity investors or quasi-equity debt providers.
Reach Commercial Finance (“RCF”) is a well-established, whole market commercial finance brokerage with a national footprint. The demand from an expanding client base has meant that funds arranged by RCF now extend beyond the traditional invoice finance and factoring core. As RCF becomes more involved in funding solutions outside of the traditional invoice finance and ABL market, equity and quasi-equity finance form an increasingly attractive option to clients.
It is therefore proposed that the Aqvvs service line is adopted into a broader offering under a new brand – Reach Equity Solutions (“RES”).
The target/expected market sits across 5 scenarios:
Stress & distress
Building on the reputation in the market that Aqvvs has already established, RES will help source investment for businesses that are suffering some form of financial stress and/or distress. Clients in this position will typically have a strong business hampered by a weak balance sheet.
Immature and high growth
Small businesses with little or no trading history and rapid growth businesses will often struggle to secure adequate finance through traditional debt. Equity and quasi-equity funding may provide a short or long-term solution.
Retirement and succession
Many small business owners struggle to secure an acceptable method to pass their business on to younger generations or to simply secure an acceptable offer to allow them to retire.
Full or partial exit
Similar to the retirement point above, many small business owners find it difficult to secure an exit on acceptable terms and this can be even more difficult where only some of the shareholders wish to exit while others wish to remain in the business.
Lender gearing covenants
The Covid-19 pandemic will have a lasting impact on the debt market as lenders seek to make loan proposals more resilient. One tool that will be used will be stronger gearing covenants meaning that additional equity will be necessary to secure required levels of debt.
Many businesses face an uncertain period as the aftershocks of the Covid-19 pandemic continue to be felt throughout the economy. Many sectors, including retail and hospitality and leisure continue to face forced closure while many others are reorganising and restructuring to cope with changes to operations such as working from home reduced travel and a reduction in face to face contact.
We believe that this creates opportunities where:
- Businesses need some form of restructure, reorganisation and refinance;
- Business owners, shell-shocked by the events of the last 12 months decide they have no appetite to continue and wish to extract whatever value they can from their business;
- Ageing business owners lack confidence of their ability to continue in an increasingly digital business environment and look to pass control on to their children;
- Lenders, concerned over the financial strength of their clients impose stricter covenants on lending or request increased equity participation.
Launch
The new website and message to the external market is planned for the launch 19th April when we will be promoting the brand and the message via various social media outlets as well as through our existing introducer and Acquire databases.
If you have any questions get in touch with Shaun Hyland – shaun@reachcf.co.uk or Gary Cain gary@reachcf.co.uk