Will Brexit mean that businesses need bridging finance?
According to Boris Dzhingarov, writing at the end of March in the financial website Market Oracle, the British economy in the short term will suffer because of Brexit. He predicts that businesses will experience a large decrease in their capital and profitability.
Britain’s GBP has dropped since the EU referendum and this has been reflected in exchange rates. The pound-to-euro exchange rate could fall to one for one, and Dzhinarov has warned:
“This drop will trigger massive losses for investors and businesses alike; furthermore, the challenge is that economists and financial market investors believe that there will be a hard Brexit; without the binding trade agreements between the UK and the rest of the EU finally negotiated before Britain leaves the European Union.”
Dzhingarov is still optimistic that the UK economy will bounce back. He believes that once the Brexit process has been finalised, the economy should recover. To keep businesses afloat during the lean times, he says that many of them will need bridging loans. Although bridging loans are mainly used to fund property deals, increasingly businesses are using them to pay their expenses during periods of low cash flow.
Bridging loans can be approved and funds available quickly, but there needs to be a clear exit strategy that details when and how the loan will be repaid. Bridging loans are short term loans of up to two years. A business applying for a bridging loan needs to be certain that itscash flow will rise before the end of the loan period.