Business lenders believe that the coronavirus outbreak could become a bigger and much faster-moving crisis than the 2008-2010 financial crisis.
According to the latest ‘Lender Pulse’ report from business finance finder Rangewell, most small- and medium-sized enterprise (SME) lenders are “very nervous” about the impact that the virus could have on their business models.
Almost all lenders are revisiting deals that have been approved and are giving them a ‘coronavirus review’, said Rangewell.
This review can range from “a paragraph” on how coronavirus will affect their business, right through to a full re-underwriting.
Meanwhile, turnaround times at most lenders have already deteriorated – mainly due to the fact that all deals, whatever stage they are at, are being re-examined.
Over the past few weeks, Rangewell has seen deals being turned down that they believe would have been approved prior to the outbreak.
“As we saw yesterday with the global shares slump the coronavirus outbreak has left us in serious economic times of uncertainty,” said Nic Conner, research consultant at Rangewell.
“Even the most optimistic market analysts believe any recovery would now be the slower ‘U-shaped’ recovery rather than the rapid ‘V-shape’.
“Yesterday’s slump could very much be seen as the first domino toppling toward a recession. A squeeze on credit to British business will have a noticeable negative effect up and down the country. By monitoring UK business lending appetite it can be used as the canary for the economy as a whole.”
Two lenders approached Rangewell last week with new development exit products.
Their belief is that property sales will decline materially in the next few months and so they are offering a product that allows developers with finished properties to exit expensive development finance and go into a cheaper alternative.
Rangewell also referenced a number of deals, predominantly in the leisure and hospitality sectors, that were expected to get approved at credit with the high street banks, but failed to get funding due to “coronavirus concerns”.