Planning to refinance? Aberdeen businesses will encounter difficulties with expansion plans following oil and gas downturn Dec 18 2017 | Hall Morrice

Hall Morrice Corporate Finance warns that demonstrating sound financial planning will be key to securing loans

The first green shoots of economic recovery are sprouting up across Aberdeen. Balance sheets are starting to tip in the right direction; order books are looking healthier than they have done for years; and a there is a growing sense of quiet optimism in the air over the city.

But that is not all that has changed in the months that Aberdeen has spent hoisting itself out of the oil slump. Three years ago, a company name alone was often enough to curry favour with the bankers and investors who would be scrambling to sign off on finance deals.  

Fast forward to 2017 and the investment landscape has changed beyond all recognition. While it was never as simple as picking up the phone to get finance with the local bank manager, there are now even more conditions to be met.

Melanie Gilmour, manager at Hall Morrice Corporate Finance, says this new approach is having a major impact on Aberdeen-based companies that are looking to upscale and refinance after emerging from the North Sea downturn.

Her advice? If you plan to grow your business and require finance to fund that expansion then you should start planning for that scenario now – regardless of whether those plans are in the short, medium or long-term future.

“There is no doubt that the recovery is well and truly underway in Aberdeen and there many companies out there – especially those that would be considered relatively small – that are ready to grow,” explains Melanie.

“But when you are either seeking to expand or even just replace revenue lost over the last two years, how do you finance it? It’s no longer possible just to turn up at the bank and ask them for the money: they – quite rightly – need to protect their investment and are asking for more detailed information, not just of their oil and gas customers, but of businesses across the whole spectrum of industry.

“Projections are therefore key. You need to be able to show that you can service the debt under a wide range of different scenarios such as contract losses and so on: there’s a great deal more planning and reporting that needs to be undertaken.

“The most important thing however it to start the process as early as possible. As soon as you realise that you might have the requirement to raise finance, you need to start the ball rolling.”

Hall Morrice Corporate Finance was launched earlier this year by Aberdeen-based independent chartered accountants Hall Morrice LLP as part of its response to service an anticipated uplift in oil and gas deals activity.

Some of the key pieces of work undertaken by Melanie over the past three months include refinancing deals – all of which require specialist skills to ensure that banks receive consistent material and methodology.

Melanie urges business in Aberdeen to be realistic about their options and, should the bank not be in a position to lend the money, consider what other sources of funding may be on the table. Private equity houses, for example, are already coming to appreciate that the Granite City is about to bounce back and are eager to get in on the most lucrative opportunities.

She adds, “Unfortunately, articles which have appeared in the Press have not always been very helpful and have not helped to portray the positives and the success stories. People who are not based in the city hear the words Aberdeen and energy and think things are very bad – they view it as a ghost town, when that is not the reality at all.

“Your local bank contacts will want to do everything they can to support you, however if they are going to be able to do this, they need to have all the facts at hand with detailed, up-to-date financial information and realistic projections

“It is essential to present the business in the best possible way -  submitting statutory accounts that are nine months old only show the historical trend which in recent periods have not been favourable and do not show the true growth opportunities available to the business.

“Banks need to see where the business will stand two or three years down the line, the impact of different variables and whether you can actually service a refinancing arrangement under those different circumstances.

“It is a specialist area and if you do not have the skills within your own business to present this information in the format the banks require, then you need to think about engaging someone who can and doing it as soon as you anticipate the need, regardless of whether it is a few years into the future.”

Hall Morrice Corporate Finance is a new division launched by Hall Morrice, on of Scotland’s leading independent firms of chartered accountants. Based in Aberdeen, the division specialises in corporate finance and due diligence services in the energy sector. Hall Morrice can be contacted on 01224 647394 or at accounts@hallmorrice.co.uk

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