New Business Start Ups and Increasing Corporate Finance Activity
Antony Federer, Rayner Essex Partner, shares his outlook on new business start ups and restructuring for 2021 and beyond.
Record Year for Business Start Ups
The BBC recently reported that 2020 had been a record year for new business start-ups. This might come as a bit of a surprise for some, but recessions often result in a burst of new business formations.
There are many reasons for this. Some new businesses are born out of adversity, for example, when someone has been made redundant which can provide the motivation and often the funds to launch a new business. Some may decide that an existing business is no longer worth pursuing, possibly because of changed market conditions but they then see an opportunity elsewhere, perhaps in an emerging new market.
It’s interesting to note that some very well-known brands have been set up during recessions including General Motors, CNN, and Uber, to name a few. But what do we think will happen in the months to come?
2021 and Beyond…
Much will of course depend on our ability to control the current pandemic. Administering effective vaccines and treatments will help society recover and eventually restore some normality to the way in which we conduct and operate our businesses.
The Spring will bring its challenges. Given the above comments on the medical situation, we will likely see the gradual reduction in state support for businesses and individuals.
Deferred VAT and taxation payments will need to be addressed, loan scheme payments will need to be budgeted for, and furlough will likely begin to be wound down. This may see some businesses faced with the need to restructure or start to look for additional sources of funding which could come with a need for deeper personal guarantees. Others may decide to exit from their business and take advantage of current low levels of Capital Gains Tax before any increases are announced.
Financing for businesses will be a critical issue in the months ahead as will the ability to manage already stretched cash-flow.
In previous recessions we have seen Mergers and Acquisitions pick up, with some good bargains available for those with the resources available to act.
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The good news is that there are opportunities for entrepreneurs with a strong vision and the financial backing to achieve their aims. There will no doubt be some great success stories that come from this challenging era. If you are seeking guidance on business structures, financing and re-structuring, mergers, acquisitions and disposals then please get in touch with me directly or fill out the contact form below.