Receivables Finance Sector

Volatility And Business Optimism Will Shape Receivables Finance Sector

21 September 2022

2022 is proving to be another unpredictable and volatile year for business and, as ever, borrowing will continue to play a vital role helping firms cope and overcome existing and emerging challenges.

Yet, our latest report into the receivables finance market shows that borrowers – that is firms large and small in markets including the US, UK, Germany, France and the Netherlands – are remarkably optimistic about what the future holds for their business. The key question for lenders is what this mix of uncertainty and optimism means for the receivables finance sector.

Lingering And New Concerns

You could be forgiven for thinking the Covid-19 pandemic gave businesses their fair share of volatility and uncertainty, but today firms face a whole host of challenges, from the war in Ukraine to the potential for new Covid variants to emerge and shutdown industries and economies.

In fact, more than half of respondents (52%)  in all five countries listed Covid-19 as one of the top three challenges their business faces. That figure was highest in the world’s largest economy, with 59% of businesses in the US concerned by the potential threat of the virus.

But it’s clear that rising costs are also emerging as a concern amongst businesses. Where supply chain disruption or Brexit might affect businesses differently, depending on their size, location and the sector in which they operate, every company is impacted by new highs in inflation. Half (49%) placed it as a top three concern. That impact is being felt particularly by small businesses – 59% of those with fewer than 250 employees rated it in their top three worries.

“We hear about consumer price inflation, yet producer price inflation is even higher”, says John De Pledge, Business Head at US bank Valley National Business Capital. “I think we’re going to see further price increases on the consumer side because [costs for] producers and manufacturers have increased.”

Post-pandemic Optimism

Despite the many challenges firms have faced since the start of the pandemic, a majority of the businesses we surveyed are remarkably upbeat about their current and future prospects.

Asked about the prospects for their business and its growth during 2022/2023, eight out of ten companies told EQ they are optimistic, with that figure rising to 90% for those in the UK and 85% for those in the US. Almost two-thirds (65%) say they are more profitable today than before the pandemic too.

These findings show the resilience of businesses of all types and sizes that have been able to cope with the economic problems they have faced during the past few years. Having withstood these challenges, these businesses are now confident about their future prospects, and there could be a sense among some that things can only get better now that economies have reopened and trade is moving more freely again.

This may all be good news for the working capital and receivables finance markets – whether or not the worst is over.

As far as working capital providers are concerned, it’s time to get ready; a lot of businesses will be coming out of government-backed loan facilities over the coming months and years and the commercial finance market will need to come to the fore.

— Matthew Davies, UK Finance

Even resilient, well-run businesses are likely to have funding gaps at present: as a result of uneven economic recovery across countries, regions or sectors, or perhaps as a consequence of needing to alter or repay finance arrangements put in place during the past two years. In addition, receivables finance lenders are always in demand during periods of economic difficulty and tend to make gains – provided they manage risks well.

Read The Full Report

To read more insights and find out about our recommendations for working capital providers, read our full Global Business Borrower Report here.

Read the full report here

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