£50m extra funding lines open for firms

Firms are in line for a major boost after financial backers said they had
managed to secure credit earmarked for the profession for the first time since
the global economy went into meltdown last year.

Syscap provides finance to the profession and has now secured new lines of
funding worth up to £50m for firms, the first major increase in funding to the
UK’s accountancy sector since the collapse of Landsbanki subsidiary Key Business
Finance in October last year.

Key Business Finance was one of the largest suppliers of finance to UK
accountancy firms.

Syscap say that the new funding lines will come as a big relief for
accountancy firms who on July 31 will have to pay their semi-annual tax payment.

Mark Gidge of Syscap said: ‘This is first piece of good news on the funding
of accountancy firms since the credit markets froze in the wake of the collapse
of Lehman Brothers in September.’

‘Many perfectly credit-worthy accountancy firms are facing huge cash flow
problems as their clients slowdown payments to improve their own cash position.’

‘The July tax deadline always creates a surge in demand for funding from
accountancy firms but the requirements this year are far higher than normal.’

The leading firms are able to turn to traditional bank lending to fund their
tax payments but because of the shortage of credit they were finding that the
interest margins banks asked for were high, Gidge said.

‘Medium-sized and smaller firms are finding those terms even more uneconomic
or that bank lending is just not available.’

According to Syscap, the cyclical slowdown in some areas of work for
accountancy firms such as M&A and corporate finance as well as feeling
general pressure on fees has meant that accountancy firms are carrying lower
cash reserves than they had in previous years.

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