SMEs With European Exposure: Funding Currently ‘Unlikely’
As a business that is focused on lending to UK-based businesses, there are no immediate implications for Money&Co. as a result of the vote to leave the EU. However, there will be uncertainty surrounding the future of companies that export to the European Union as it is unclear as to whether we will continue to have access to the single market.
Within our current loan book, there are a couple of companies that do have exposure, but we had already factored in the risk of Brexit when we did our initial analysis. Going forward, we are unlikely to lend to companies that have a significant exposure to Europe whilst the uncertainty persists.
More generally, the UK economy may slip into recession as a result of the uncertainty and political turmoil that we are now facing. This will be a challenge for all of our borrowers and potential borrowers.
Lenders should be reassured that when we are analysing companies that want to borrow from Money&Co., we look very carefully at the financial history of each company and work out how each is likely to perform in more difficult economic conditions. On average, our companies have 14 years of trading history and our largest borrower has been trading for 37 years, so we are able to see how companies coped with the last recession and predict what might happen if growth recedes.
Overall, I am reasonably confident that we have created a book of loans that will perform well if we enter a recession. With regard to new borrowers, we will be very careful to select companies that have shown resilience in previous recessions and have little exposure to Europe.
