# Navigating the post-Brexit debt landscape: opportunities for corporate funding
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2016-11-09
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Brexit aftermath: UK debt markets and corporate funding insights
Meta Description: Discover how the UK's post-Brexit landscape offers opportunities for corporate funding, with non-bank lenders showing flexibility and speed in the debt
URL: https://financedigest.com/navigating-the-post-brexit-debt-landscape-opportunities-for-corporate-fundinghtml

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The UK’s vote to leave the EU rocked the world’s financial system: stock markets plummeted, currencies tumbled and business confidence suffered a huge shock. Just over four months on, the dust is beginning to settle and the business world appears to have reconciled itself with the fact that life must go on, and while uncertainty is inevitable, it presents opportunities as well as risks.

Here, we give our view on what the referendum result means for the UK’s debt markets and why it’s not all doom and gloom when it comes to corporate funding.

**Lessons from recent history**

First we must look back to 2007/2008. The financial crisis and the resulting regulatory reforms that followed have left a well-capitalised domestic banking [sector](https://www.financedigest.com/how-embedded-insurance-can-drive-growth-and-value-for-the-insurance-and-finance-sectors.html "How Embedded Insurance Can Drive Growth and Value for the Insurance and Finance Sectors") with an extremely diverse group of “alternative” non-bank lenders to sit alongside it. It is true that the coming months and years will present challenges for the UK economy but unlike the financial crisis, the lenders may well be part of the [solution rather than the problem and our experience advising corporates with their banking arrangements in the immediate aftermath of the referendum shows there is no shortage of liquidity in the market](https://www.financedigest.com/quality-and-compliance-management-solution-market-to-rise-at-a-high-cagr-of-9-4.html "Quality and Compliance Management Solution Market to rise at a high CAGR of 9.4%").

The issue for lenders looking to deploy capital is not one of [supply but one of demand](https://www.financedigest.com/car-bulb-market-demand-supply-growth-factors-latest-rising-trend-and-forecast-to-2028.html "Car Bulb Market Demand, Supply, Growth Factors, Latest Rising Trend and Forecast to 2028"). Given the scale of the Brexit shock, a number of organisations have quite understandably postponed large investment decisions, which might otherwise be funded (in part) through borrowings. With a diminishing demand, for well-advised borrowers that can be decisive around their capital needs, understand their debt capacity and can present their business plan positively, now may be a good time to [approach the market](https://www.financedigest.com/a-holistic-approach-to-esg-is-the-best-chance-of-success-in-a-competitive-private-equity-investment-market.html "A holistic approach to ESG is the best chance of success in a competitive private equity investment market").

The question is: what does the debt [market offer](https://www.financedigest.com/future-market-insightss-detailed-report-on-cat-litter-market-offers-projections-of-potential-impact-of-corona-virus-outbreak.html "Future Market Insights’s Detailed Report on Cat Litter Market Offers Projections of Potential Impact of Corona Virus Outbreak") and what are the strengths and weaknesses of its participants?

**Alternative lending**

The 2007/2008 financial crisis saw [huge growth](https://www.financedigest.com/quad-flat-no-lead-packaging-market-huge-growth-opportunity-between-2017-2027.html "Quad-Flat-No-Lead Packaging Market Huge Growth Opportunity between 2017-2027") for non-bank lenders, which emerged in the UK partly in response to systemic under-supply of credit as mainstream banks were forced to retrench. While “alternative” in 2007/2008, non-bank lenders are by no means alternative anymore, and they are now a core part of the UK’s funding landscape.

Eight years on and in an environment of relative ‘over’ rather than under-supply of credit, the debt landscape is very different. Non-bank lenders have consolidated their [position in the market](https://www.financedigest.com/demand-scenario-of-diagnostic-imaging-devices-market-to-reveal-positive-outlook.html "Demand Scenario of Diagnostic Imaging Devices Market to Reveal Positive Outlook") on the strength of what they can offer rather than the absence of alternatives. They have shown themselves willing to be flexible on structures, deal sizes and terms and are often able to provide [interest only credit](https://www.financedigest.com/qualifying-for-low-interest-credit-card-consolidation.html "Qualifying For Low Interest Credit Card Consolidation") with bullet repayments and high-yield bond style covenants.

Often driven by increasing investor returns, debt funds have provided facilities to entities that are either distressed or who have traditionally found it difficult to access the [banking market](https://www.financedigest.com/the-sperm-bank-market-to-climb-up-the-ladder-based-on-digitization.html "The Sperm Bank Market to climb up the ladder based on digitization"). Speed of execution has also been an attractive feature for borrowers with non-bank lenders typically being able to move more quickly from mandate to [financial close](https://www.financedigest.com/fast-track-financial-close.html "FAST-TRACK FINANCIAL CLOSE"). It is unlikely that these advantages will be lost as a result of Brexit.

**Careful choices**

While there are clearly some important advantages with non-bank lenders, they will not suit all types of borrowers. If a company’s business model does not fit with a fund’s current investment strategy, the ability to raise finance with that fund may be more limited than a [traditional bank](https://www.financedigest.com/digital-banking-traditional-banks-vs-fintech-providers.html "Digital banking: Traditional banks vs. fintech providers"). This problem will be compounded when it comes to refinancing if the [debt fund’s](https://www.financedigest.com/debt-strategies-for-funding-early-stage-companies.html "Debt Strategies for Funding Early Stage Companies") mandate has changed during the life of the facility. Perhaps most crucially, if a business has ancillary [banking requirements](https://www.financedigest.com/building-a-relationship-led-bank-requires-a-more-human-touch.html "Building a relationship led bank requires a more human touch") that cannot be provided by a debt fund (e.g. bills of exchange, clearing or RCFs) that [business is still going to have to turn](https://www.financedigest.com/where-do-small-businesses-turn-when-government-support-dries-up.html "Where do small businesses turn when government support dries up?") to a bank for at least some of its banking requirements.

The referendum result has generated a significant level of uncertainty for the UK economy but in terms of the debt [markets the prevailing view is that it is business](https://www.financedigest.com/global-sulfate-free-body-wash-market-business-opportunities-current-trends-growth-market-forecast-global-industry-analysis-by-2029.html "Global Sulfate Free Body Wash Market: Business Opportunities, Current Trends, Growth, Market Forecast & Global Industry Analysis By 2029") as usual. With subdued demand, [interest rates at record lows and high levels](https://www.financedigest.com/czech-interest-rates-already-at-high-level-central-bank-governor-says.html "Czech interest rates already at high level, central bank governor says") of liquidity, now may be a good time for borrowers to approach the funding market. While Brexit uncertainty might have an [impact on a borrower’s decision to borrow, it is unlikely to have a material impact on a borrower’s decision to mandate a bank](https://www.financedigest.com/the-latest-trends-in-instant-payments-and-how-they-impact-banks.html "The latest trends in instant payments and how they impact banks") or a non-bank lender, but it remains critical to understand the strengths and weaknesses of both to ensure that the right type of lender is used.

**_David Varnham is a banking lawyer and leads the international finance group at national law firm_** [**_Mills & Reeve_**](http://t.sidekickopen68.com/e1t/c/5/f18dQhb0S7lC8dDMPbW2n0x6l2B9nMJW7t5XZs8qCdqYMcVScsfmMllW4X9Hq256dN28f4rDbxM02?t=http%3A%2F%2Fwww.mills-reeve.com%2F&si=5762700480348160&pi=b41c9bee-55f8-4bcb-a202-e2936483daec) **_. Rory Milligan is a [Senior Associate in the banking](https://www.financedigest.com/societe-generale-says-two-senior-executives-to-leave-bank.html "Societe Generale says two senior executives to leave bank") team at Mills & Reeve._**


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