How Rising Interest Rates Impact Access to Finance and Funding

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With interest rates at a 15-year high, funders increasingly expect businesses to be able to show they can cover financial covenants and continue to service outstanding debt. It’s all in the detail. AAB’s Business Funding Team can help businesses access to finance when applying for funding and/or renewing facilities, by securing more favourable terms and maximising a successful outcome.

(L to R) AAB Funding Specialist Gavin Kennedy with Michelle Hawkins – Partner & Head of Advisory at AAB and AAB ESG Lead Aveen McShane

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Although mainstream and alternative lenders continue to be active in Northern Ireland, and investment from venture capital and private equity funders is on the rise, businesses can find it difficult to secure acceptable terms when existing facilities fall due for renewal.

 

“Regulatory requirements mean that funders must rigorously monitor and enforce lending covenants and this can present difficulties in terms of debt-servicing capacity in an inflationary interest rate environment,” says Michelle Hawkins, Partner & Head of Advisory at AAB.

When seeking to renew or secure new facilities, businesses need to ensure they are clear about their funding requirements, present detailed backup information, and have a credible management team and a robust business strategy in place.

 

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Effective Communication with Funders is Key for Access to Finance

To enable funders make an informed decision about a funding application, current market conditions need to be taken into account.  Detail is essential when preparing documentation and it’s important to demonstrate that you have factored in and mitigated the financial and operational risks associated with your business. Ideally you want to develop a partnership relationship with your funder.

Businesses should produce quarterly/monthly management information, compare actual to budgeted income and expenditure, and revise forecasts when necessary, advises AAB Funding Specialist Gavin Kennedy.

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The Importance of ESG

With investors and funders increasingly interested in supporting SMEs who can demonstrate that they have a positive social and environmental impact, businesses also need to focus on improving their sustainability and reducing their carbon footprint, says Aveen McShane Senior Advisory Manager & ESG Lead at AAB.

ESG is a strategic priority for Northern Ireland’s economy and there are various interest free / low interest products on the market as well as financial incentives from Invest NI and InterTradeIreland to support companies on their journey towards sustainability.

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Our Business Funding experts are on hand to answer any questions you may have and can support your business when seeking access to finance, funding or when renewing facilities.

For information on how AAB can support your business on your funding journey, contact us or click the ‘Need a Call Back’ button and fill out the request form.