Are you ready to reopen your estate agency?

It is hard to remember now, but the housing market was enjoying some real signs of recovery in the early part of 2020. London estate agents reported their highest buyer interest in 15 years. The numbers of potential buyers were around 92% higher than the equivalent week last year, and up 95% on 2018.

There were similar stories across the country - but they all came to an abrupt end as soon as COVID-19 reached our shores. House moves were banned unless essential.

Viewings suddenly became impossible. Sellers were refusing to allow visitors into their homes even before lockdown made it official policy. Worse still, valuers were not going out to assess properties for mortgages lending - and lenders themselves had stopped offering loans until the extent of the crisis became clear. 

The government’s decision to shut down estate agents as ‘non-essential’ came as no surprise - and many agency owners were actually relieved. 

“We didn’t want to show people around homes - we didn’t want to visit them ourselves. We were happy to join the lockdown - although we knew that we could not afford it to last long." 

According to property website Zoopla, almost 400,000 existing sales have been stalled during lockdown, the delay in completions meaning estate agents will have to wait longer for their commission. Zoopla estimated that commission payments on the 373,000 stalled sales added up to £1bn.

The losses to the industry have meant serious problems - although the vast majority of agency staff have been furloughed, the overheads for most small agents continue to drain what reserves they have. 

The news that restrictions were being lifted for the sector - in England at least - came as a surprise to estate agents. Housing secretary Robert Jenrick announced that in-person viewings and completions could resume, estate agents and show homes could open their doors, and conveyancers and removal firms could return to work.

So did the fact that there was already some demand from potential buyers. 

Restarting work

Agents are calling buyers and sellers to ask if they want to continue with deals that were already close to being agreed, and getting in touch with other clients to see whether they are happy for people to view their homes. Most are advising sellers to leave the property while potential buyers are shown around while kitting out their agents with PPE. Agents will wear face masks and gloves while carrying out viewings, will open doors in advance and will sanitise doors and light switches before and afterwards.

But business may be slow at first. Surveyors expected sales activity to take around nine months to recover and prices around 11 months to pre-crisis levels. 35% of members said prices could fall by up to 4%, and another 40% of members said prices could fall by more than 4%.

It means that even if you have reopened for business, there may not be too many buyers or sellers making their way through them in the next few months - and that the estate agency business will be very competitive. Not every agent who reopens now can expect to stay in business - and keeping very tight control of the costs will be essential if your business is to be one of the survivors.

You may have some extra expenses. Health and safety provision may be one of them, but the main challenge for your cashflow - and the survival of your business - will be the lack of income.

Instructions may be thin on the ground and you may need to drop your commission rates to secure the business from whatever enquiries come in. Your competitors may be joining you in a race to the bottom in some locations where there are too many agents. 

Aside from bricks and mortar businesses, the competition from online agents will not have gone away - and, in fact, it may have become even stronger during lockdown when people have taken to their screens for comfort.

So how can you deal with a cash flow crisis that could last for month until the market recovers? At Rangewell we can help you find the answers – and the cash you need.

Coping with your cashflow

There are many types of funding that you may be able to consider. CBILS, and other government funding schemes, may be available but while there are positives coming from these schemes, you may have other options too in the form of Short-term Finance.

Working Capital Finance

A Working Capital Loan can be the simplest way to support your cash flow until your income stream is positive again.

Working Capital Loans can be used to cover everyday operating expenses, such as your accounts payable and payroll when cash flow is slow. They are simple, short-term loans designed to provide a cash lump sum very quickly - in a matter of days with some lenders - and intended to be paid back in a matter of months. A short-term unsecured loan can often be arranged in a week.

So you could get a short-term cash boost to help you cover the costs of bringing back staff and marketing - and pay it off when the investment starts to deliver returns. 

Overdraft Replacement

An overdraft used to be an everyday business finance facility provided by your bank. Your overdraft would be agreed as part of your business banking arrangements - and for many businesses, it was the main source of credit..

It was simple to use, and let you withdraw cash that you didn’t have in your bank account as you needed it as a short-term loan. You could use it for a few days or a few weeks as a buffer against cashflow slowdowns or deal with larger expenses. Your bank would only charge you for the cash you withdrew and for the time you used it. It could be the ideal way to tide your agency over until a sale was finalised and your commission paid.  

But when the credit crunch hit, the banks reduced or removed the overdrafts they extended to small businesses. Revolving Credit, also known as Overdraft Replacement or Alternative Overdraft Funding has grown up to fill the gap.

These Alternative Overdrafts are provided by a number of lenders, and offer instant access to funds, just like an overdraft, although no bank account is involved. Instead, a lender provides a line of credit with a limit usually based on your past income.

The facility will only mean a charge when you actually use the cash, based on the amount you draw down and the time which you hold it. You can repay at any time, and the funds will be ready for use again.

This can be a useful additional source of funding if you need access to small cash sums for short periods, for purposes such as buying in fresh supplies or bringing in PPE.

Both secured and unsecured arrangements can be provided, with those arrangements secured on assets usually offering more attractive rates.

Refinancing

Of course, there is an alternative approach to making new loan agreements - and that is taking a fresh look at loans you already have.

The chances are that you already have a wide range of loans and funding agreement in place. Refinancing - replacing these agreement with loans that offer lower rates or longer terms could substantially cut your outgoings.

At Rangewell, we can help you find lenders with the kind of rates you need - and help you secure the funding deals you want from them.

There is a second way to use refinancing to bring your agency cash at this challenging time. 

The equipment that your business already uses - cars, It even things like desks and seating represents a considerable investment. Asset Refinance lets you re-use that investment, while still having full use of your assets. The finance company will buy the asset from you, providing you with a cash sum. You then buy the asset back with a new finance arrangement.

You may even be able to refinance your property. By remortgaging your business can receive a cash lump sum comparable to its market value to use as you wish. So existing premises could be used to raise funds - or to seize other opportunities for your business. You simply make monthly mortgage repayments until the property becomes yours again - and it is usually not necessary to have paid off the initial purchase of a property to be able to use it to raise funds in this way. 

Getting the help you need to keep your agency afloat

Getting the right type of funding for your agency at a challenging time - and getting it quickly - can be vital for its survival. You need cash quickly, but you must be certain that the rates and terms are fair and affordable as your business starts to pick up again.

At Rangewell, we know the lending products that are available and which can be the most cost-effective for your needs. Rates will vary between providers and will also depend on the level of funding agreed.

We also know the most competitive lenders. Of course, some have themselves shut down with the coronavirus crisis. We know those that have not, and who can be in the best position to provide you with short-term cash as quickly as possible.

At Rangewell, we are expert in all types of business finance. We can help you find the funding that's most appropriate for your business and situation, whether you're looking for help with a government scheme, new lending or in need of fresh ways to cut the costs of lending you already have arranged. 

During the current crisis, and as we come out of it, we can provide the support you need to find the most suitable funding for your business.

Call us now – our experts are ready to help you with your finance problems during the coronavirus crisis - and as we start to come out of it.