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Aaron Vetier, head of business development at Reto Finance, explains how the firm is poised to support you and your business
IN a world marked by fluctuating interest rates and geopolitical uncertainty, the financial landscape for businesses and individuals seeking financing has become increasingly complex.
Here we explore the impact of higher interest rates on those requiring finance and how Reto Finance is uniquely positioned to offer continued support during these uncertain times.
Over the past five years, the Bank of England base rate has undergone several changes, significantly influencing lending rates. An increase in the base rate generally leads to higher borrowing costs for businesses and individuals alike, which can result in higher monthly payments on loans and mortgages, making it more challenging for borrowers to manage their finances.
The reality is that since the latest millennium, we’ve not seen such aggressive base-rate increases in a short period, as we have since December 2021, where in the space of 36 months, we saw an increase of 5.15%, peaking at 5.25% and then “landing” at 4.75%. This clearly has an impact on borrowing capability and lending pricing/policies/appetite, especially for businesses.
The current market conditions have been heavily impacted by inflationary pressures, which impact materials, wages and general consumer spending. Businesses are facing increased costs in several areas, including:
Materials
The cost of raw materials has risen, affecting production costs and pricing strategies.
Wages
Companies are under pressure to increase wages to keep up with inflation, further straining their budgets.
Consumer spending
Inflation erodes consumer purchasing power, leading to reduced spending on goods and services.
Business rent and fixed costs:
Rent and other fixed expenses have also increased, adding to the financial burden on businesses.
Utility bills:
Rising energy costs are another significant factor impacting business operations.
We’ve also seen the impact of refixing mortgages at higher interest rates on both individuals and businesses, which can significantly impact disposable income. When mortgage rates rise, homeowners with variable-rate mortgages or those looking to remortgage typically face higher monthly payments, resulting in a reduction in disposable income, usually leading to decreased consumer spending and further economic slowdown.
When economic conditions are unstable, both borrowers and lenders may be inclined to become more cautious. Borrowers often delay concluding agreed loan facilities due to concerns about their ability to repay, while lenders may tighten their lending criteria to mitigate risks, sometimes materially altering lending appetite which can lead to product removal or postponement. We’ve seen such actions undertaken by several lenders over the past 24 months.
In recent times, high-street lenders appear less active in the provision of loans in the consumer and SME space and, in the age of technology and digital banking, the number of face-to-face interactions and “transactions” are nearly non-existent.
This can remove the direct relationship support of funder to borrower, where often the borrower and the lender (particularly those with the ability to sanction deals) are saying the same thing but speaking in different languages. We at Reto Finance strongly believe in the traditional way of “relationship management”, and our business development team is always accessible to provide support and guidance, for whatever your financial needs may be.
Despite the current challenges, there are reasons to remain optimistic. The Bank of England has indicated potential rate reductions in the near future, which could lead to lower rates for lending products. This would provide relief to borrowers and stimulate economic activity by making financing more accessible and affordable.
At Reto Finance Ltd, we have continued to support consumers and businesses in Jersey and Guernsey through this economic uncertainty, evidenced recently by us having surpassed the £200m figure of new loans to Island customers within our five years of trading.
A substantial portion of this has been dedicated to SMEs, and this commitment demonstrates our dedication to fostering growth and stability in the business community. This includes a recently provided lending facility of over £1m, to assist with the purchase of a long-standing local business.
We have continued to evolve our credit policies for client benefit, as opposed to altering them for an overly conservative view on lending. We are here to support our clients through the good times and the bad.
The historical “rate gap” between highstreet banks and specialist lenders is shrinking, where higher-than-normal rates for high-street banks mean specialist lenders, such as us, are priced more competitively than people may appreciate. This further shift in the lending landscape presents an opportunity for borrowers to explore alternative financing options that may better suit their needs.
We at Reto Finance Ltd have continuously invested in experienced professionals within the lending industry to expand our product offering. This investment has helped us provide an efficient and knowledge-driven lending service to our client base, tailoring solutions to borrower funding requirements.
These include but are not limited to:
Personal Lending
- Holidays/life events/debt consolidations.
- Asset purchases.
- Extensive high-value unsecured property renovations.
Business Lending
- Asset purchases, including plant, machinery and motor vehicles.
- Funding for business expansion and growth.
- Business acquisition finance – secured and unsecured.
Property Finance
- Bridging finance.
- Property investment (both commercial and residential).
- Property renovation and development finance (both commercial and residential).
With an experienced local relationship team and underwriting decisions made in the Island by those who understand your personal and business needs (as well as market conditions), Reto Finance is well poised to support your next financial steps. We look at lending in a simple way and work with our clients, evolving alongside their personal and business finance requirements.
In these times of higher interest rates and geopolitical uncertainty, it is crucial to have a reliable financial partner. We are resolute in our commitment to providing tailored lending solutions that meet the unique needs of individuals and businesses. By staying adaptable and responsive to market conditions, we ensure that our clients receive the best possible support to navigate financial challenges and seize opportunities for growth.
