{"id":246277,"date":"2025-10-28T12:13:10","date_gmt":"2025-10-28T12:13:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/246277\/"},"modified":"2025-10-28T12:13:10","modified_gmt":"2025-10-28T12:13:10","slug":"why-cycling-businesses-struggle-to-secure-bank-lending-and-how-to-fix-it","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/246277\/","title":{"rendered":"Why Cycling Businesses Struggle to Secure Bank Lending: And How to Fix It!"},"content":{"rendered":"

By Damian Hackett \u2013 Director and Senior Partner at Last Mile Consulting<\/a><\/p>\n

\"DamianDamian Hackett<\/p>\n

From Wiggle\u2019s \u00a397m losses to the closure of Moore Large, and a seemingly constant stream of notable brands across the globe announcing their restructuring or closure, the cycling industry has faced unprecedented turbulence since the pandemic boom. But behind the headlines of bankruptcies and administration lies a more fundamental question: Are cycling businesses being victimised and experiencing more resistance from financial institutions than other industries? And if so, what rational reasons could explain this attitude?<\/p>\n

The cycling industry\u2019s unofficial motto through 2024 was stark: \u201cSurvive till \u201925.\u201d Companies clung to this mantra as they navigated what many described as the most challenging trading conditions in a generation. Now, in late 2025, we can assess not just who survived, but whether access to functional capital played the decisive role in separating the viable from the vanquished.<\/p>\n

This isn\u2019t just shop talk \u2013 it matters. UK bike sales have crashed to twenty-year lows. Inventory is still sitting in warehouses across the country. Brexit, raw material costs, and logistics nightmares continue to squeeze margins. The result? Working capital has become a life-or-death issue for many businesses. And here\u2019s what I\u2019m seeing: cycling businesses \u2013 whether you\u2019re a manufacturer, distributor or retailer \u2013 are getting a harder time from banks than most other sectors.<\/p>\n

The Evidence: A Pattern of Resistance<\/p>\n

While we don\u2019t have perfect data on this \u2013 banks don\u2019t exactly publish \u2018sectors we\u2019re avoiding\u2019 reports \u2013 I\u2019ve been talking to manufacturers, distributors, and retailers across the UK since starting Last Mile Consulting, and the pattern is unmistakable: cycling businesses are being turned down or offered worse terms than comparable businesses in other sectors. The COVID boom-bust tells most of the story. UK bike sales hit 2.7 million units in 2020, then collapsed to 1.6 million by 2022. That kind of whiplash makes banks nervous. The subsequent wave of insolvencies proved unprecedented in the industry\u2019s modern history, claiming Wiggle Chain Reaction, Moore Large, 2Pure, FLi Distribution, and hundreds of IBDs in the UK alone, let alone the carnage wreaked across the wider European and US markets.<\/p>\n

As a consequence, banks did what banks do \u2013 they pulled back. When HMRC became a secondary preferential creditor, inventory suddenly became less attractive as collateral. Many specialist lenders who used to work in cycling left in 2023-2024. The ones who stayed started demanding bigger personal guarantees and higher minimum loans\u2014\u00a3100,000 to \u00a3250,000\u2014which effectively shut out most independent bike dealers entirely.<\/p>\n

Now, to be fair, it\u2019s been rough for everyone. The post-Brexit\/post-COVID economic landscape has been challenging for all small businesses seeking finance. UK business failures hit 25,000 in 2023, a thirty-year high. Retail, hospitality, construction \u2013 they\u2019ve all been hammered. Small business lending volumes declined approximately 15% year-over-year, with interest rates averaging 3.5 to 4.5 percentage points above prime rate. But cycling has some unique characteristics that make banks even more nervous than usual.<\/p>\n

The Structural Factors Behind Banking Caution
\nExtreme Volatility and Inventory Risk<\/p>\n

Cycling experienced the textbook \u201cForrester (or Bullwhip) Effect\u201d \u2013 small demand changes producing whip-like effects upstream. The pandemic created unprecedented demand spikes, supply chain breaks, massive precautionary over-ordering, sudden demand collapse, and catastrophic inventory surpluses. Even towards the end of 2025, some industry experts estimate many businesses still carry 150-200% of optimal inventory levels, with lead times that exploded from ninety days to 500-700 days during the supply chain crisis.<\/p>\n

Banks view inventory as collateral \u2013 but cycling inventory presents unique risks. High SKU complexity means hundreds of sizes, colours, and specifications per model. Rapid obsolescence follows annual model changes, and rapid technology evolution sees a significant drop-off in demand for \u2018old\u2019 inventory. Seasonality compresses more than 70% of annual sales into a six-month window. Limited secondary markets exist for liquidation stock, and component interdependency means complete bikes require matching parts. BDO\u2019s recent analysis highlighted that HMRC\u2019s new preferential creditor status specifically reduced banks\u2019 appetite for inventory-backed lending in cycling, making traditional asset-based lending structures less attractive.<\/p>\n

Business Model Fragmentation<\/p>\n

Here\u2019s another problem: the cycling industry doesn\u2019t fit into neat boxes. Try explaining your business model to a bank, and you\u2019ll see what I mean.<\/p>\n

If you\u2019re a manufacturer, you\u2019re burning cash for twelve to twenty-four months before you see revenue. You\u2019re investing heavily in R&D, tooling and managing currency exposure (since most production is in Asia), as well as pouring money into brand building. Your cash flow looks terrible on paper, even when your business is healthy.<\/p>\n

Distributors have a different nightmare \u2013 working capital. You\u2019re buying containers full of inventory, extending credit to retailers, and watching your margins get squeezed by brands going direct-to-consumer. Banks see you as \u2018just holding boxes,\u2019 even though you\u2019re managing complex logistics and credit risk. And don\u2019t forget that your \u2018boxes\u2019 have the depreciation integrity of a cardboard umbrella! If you don\u2019t sell them within their sales window, they can often become loss-making.<\/p>\n

Retailers? You\u2019re dealing with massive seasonality, high fixed costs, online competition, and customers who buy a bike every five to ten years. Your cash flow chart looks like a rollercoaster.<\/p>\n

The problem is that banks like standardised lending products. They want to run your numbers through their models and get a clean answer. But cycling doesn\u2019t work that way \u2013 each tier needs completely different underwriting. Most banks can\u2019t be bothered.<\/p>\n

Unlike industries with more integrated supply chains or clearer financial profiles, each tier requires different underwriting approaches, making standardised lending products difficult to apply.<\/p>\n

The Scale and Sophistication Gap<\/p>\n

The majority of cycling businesses are small to medium-sized enterprises (SMEs), a sector already facing lending difficulties. In the UK, 67% of these businesses employ fewer than ten people. Many are owner-operated or family-run, often exhibiting limited financial expertise and reporting, presenting weak balance sheets, displaying poor working capital management, and many have finance already, with a significant dependence on personal guarantees.<\/p>\n

Here lies a critical, uncomfortable question: Does the \u201cfollowing your passion\u201d nature of cycling create financial management challenges? Evidence suggests it might. A high proportion of cycling business founders entered via enthusiasm for their sport rather than with an obvious business case. Industry culture often prioritises product and brand over financial rigour, with underinvestment in financial systems, forecasting, and working capital management. Emotional decision-making around inventory and product ranges compounds these challenges, alongside resistance to implement professional management structures as businesses scale.<\/p>\n

As with many opinions, the counterargument proves equally compelling. Deep knowledge of such a technical product is vital to building a strong product portfolio and a reputation for expertise that attracts customers and builds loyalty, and with 86% of the revenue in the German cycling market now being created by the sale of e-bikes, product technical complexity is not slowing down any time soon (they will all need servicing at some point).\u00a0<\/p>\n

I have personally witnessed numerous examples of people from banking and finance backgrounds entering the market, only to grow frustrated and weary at the level of return relative to the effort and nature of work required to build a brand. Without passion for the activity, they lose motivation and either sell out or simply fade away. For many purely financially motivated entrants, the juice is simply not worth the squeeze. The truth is that balance must be achieved to succeed\u2014passion provides the product knowledge, customer understanding, and long-term commitment essential for competitive advantage, while financial discipline ensures sustainability.<\/p>\n

Banks increasingly use sophisticated analytics to assess management quality (more in the next paragraph). Red flags include weak financial projections and unrealistic growth assumptions, poor inventory management and working capital discipline, insufficient management information systems, over-optimistic recovery plans post-COVID, and inability to articulate clear, data-driven strategies. To stay on the right side of the funders\u2019 scrutineers, it is prudent to engage in a credit readiness assessment. This process helps identify where lenders may find reason to object to a business\u2019s funding application and helps you pre-correct your course to your best advantage.<\/p>\n

Post-COVID Stigma and Pattern Recognition<\/p>\n

Financial institutions developed pattern recognition around COVID-supported businesses. Many cycling companies accessed COVID Business Interruption Loans and Bounce Back Loans, with pandemic support measures delaying natural market corrections. As support unwound in 2022-2023, a wave of insolvencies emerged, making banks cautious about sectors exhibiting this pattern.<\/p>\n

Cycling\u2019s peak COVID boom coincided with government lending guarantee schemes, which suppressed insolvency rates and offered easy credit conditions which simply deferred economic reality. The subsequent correction coincided with the withdrawal of government support, rising interest rates, bank capital constraints, tightened lending standards, and Basel III implementation pressures. The industry\u2019s trajectory raised fundamental questions about business model sustainability versus temporary demand shock, making underwriting decisions more complex and heavily risk-weighted.<\/p>\n

Building Bankable Business Cases<\/p>\n

So, what can you do about this? More than you might think, actually.<\/p>\n

I\u2019ve helped quite a few cycling businesses get funding since beginning Last Mile Consulting, and the ones who succeed have three things in common.\u00a0<\/p>\n

First, their financials tell a clear story. Banks want to see at least two years of trading history, positive EBITDA (or a realistic plan to get there within twelve months), and a debt service coverage ratio above 1.25x. That last one just means you can comfortably afford the loan payments.<\/p>\n

Second, they demonstrate management credibility. Do you have relevant experience? Can you produce monthly management accounts without scrambling? Can you articulate a clear strategy without hand-waving? Do you have professional advisors (a good accountant, a strong non-exec director)? Banks are assessing you as much as your business!<\/p>\n

Third, they understand their market position. Who exactly are your customers? What\u2019s your genuine competitive advantage \u2013 not marketing fluff, but real differentiation? What market share can you realistically capture? Banks have seen too many optimistic projections that bear no relation to reality.<\/p>\n

The Playbook by sector:
\nManufacturing<\/p>\n

If you\u2019re a manufacturer, your problem is obvious \u2013 you\u2019re burning cash for months before you see revenue, and banks hate that.<\/p>\n

Here\u2019s what works: show them you\u2019re sophisticated. I mean genuinely sophisticated, not just well-intentioned. You need professional-grade, rolling 18-month cash flow forecasts that you actually update monthly. You need to show you\u2019ve diversified your supply chain (learned that lesson in 2020-2021, right?) and that you have a real strategy for managing currency exposure \u2013 not just \u2018we\u2019ll figure it out.\u2019<\/p>\n

And honestly? You probably need a CFO, or at least a non-exec director with serious finance credentials who can speak the bank\u2019s language. If you\u2019re the founder and you\u2019re passionate about your product, but your eyes glaze over during financial discussions, banks will notice. Get someone on your team who lives and breathes this stuff.<\/p>\n

Distribution<\/p>\n

Distributors, on the other hand \u2026 your problem is working capital. You are trapped in the middle. You must demonstrate data mastery. Show you are not just \u201cholding boxes\u201d but are a sophisticated logistics operation using AI-powered demand forecasting and aggressive SKU rationalisation. Show robust credit risk management and, ideally, trade credit insurance or ID lines. This proves you are managing your risk, not just passing it on. I\u2019d almost consider those as imperative, having seen several distributorships (my own included) almost wiped out by bad debts. Investing in ID lines may reduce margin slightly, but it gives you access to working capital at a fraction of the cost of other sources, and almost entirely de-risks your ledger!<\/p>\n

Retail<\/p>\n

For Retailers (IBDs in particular) \u2013 Your problem is high fixed costs, seasonality, and online competition. You must demonstrate resilience and diversification. Arguably, the most important page in your business plan is the one showing your workshop revenues and supporting marketing. High-margin, non-seasonal service revenue (ideally 35%+ of total) is the single best way to de-risk your business. Consider this, when your mechanics are building bikes, their time is considered \u2018Cost of Sales\u2019, whereas when they are servicing a bike, they are the sale.\u00a0<\/p>\n

By building excellence and mastery in servicing and maintenance, your workshop stabilises your income and builds customer loyalty. Also, demonstrate your activity in Cycle to Work schemes, community events, and bike fits. Prove you are a local service hub, not just a showroom.<\/p>\n

A strong lending case, regardless of tier, has a Debt Service Coverage Ratio (DSCR) over 1.25x (proving you can afford the payments) and a specific, ROI-based use of funds. \u201cWe need some working capital\u201d is a weak request, whereas, \u201ca \u00a350,000 loan to equip two new e-bike service bays with hydraulic service lifts and specific tools, which will satisfy the increased demand we are experiencing and increase workshop revenue by 40% with a 12-month payback\u201d is a story a bank can fund.<\/p>\n

Furthermore, engaging in professional CRM software and value-added marketing to ensure gains in efficiency and engagement are not being left on the table is a complete non-negotiable for all businesses.<\/p>\n

Alternative Funding Routes<\/p>\n

If traditional banks won\u2019t play ball, don\u2019t give up. The lending landscape has changed dramatically in the past five years. I\u2019ve seen cycling businesses successfully use specialist asset finance providers, revenue-based financing (where repayments flex with your sales), and peer-to-peer platforms. Sale-and-leaseback deals can free up cash if you own property. Invoice factoring and inventory financing can unlock capital that\u2019s currently tied up. And honestly, leasing equipment rather than buying it outright often makes more sense anyway, and it keeps your cash available for growth.<\/p>\n

Full disclosure: this is what we do at Last Mile Consulting. We run credit readiness assessments to identify what banks will object to before you apply, find you solutions for those deficits, then work with Clear Business Finance to connect you with our panel of 60+ lenders who specialise in different sectors and risk profiles. Let\u2019s be real \u2013 not every business is fundable \u2013 but if yours is viable, there are more options than most people realise.<\/p>\n

The Path Forward<\/p>\n

So here\u2019s the bottom line: yes, cycling businesses are getting a harder time from banks than most other sectors. The volatility, the inventory risk, the fragmented business models, the post-COVID carnage with widespread business insolvencies \u2013 it all adds up to banks being nervous.<\/p>\n

But it\u2019s not hopeless. I\u2019ve seen plenty of cycling businesses secure funding since starting Last Mile Consulting<\/a>. The difference? They treat financial management as seriously as they treat product selection. They build realistic forecasts and actually use them. They manage working capital and inventory like their business depends on it (because it does). They bring in strong advisors \u2013 a good NED with finance experience is worth their weight in gold. And when they approach a bank, they have a specific, ROI-based use of funds, not just \u2018we need some working capital.\u2019<\/p>\n

The passionate commitment that drives this industry is a strength\u2014but only when it\u2019s matched with equally passionate commitment to financial discipline. The businesses thriving right now are the ones that\u2019ve figured out how to channel their love of cycling through professional, bankable business models.<\/p>\n

The financing gap is real, but it\u2019s bridgeable with the right approach and professional support.<\/p>\n

To schedule a credit-readiness assessment of your business, reach out to hello@lastmileconsulting.co.uk<\/a>. Our team can help you prepare your business to source, receive and optimally deploy the capital you need to grow and thrive in the new marketplace.<\/p>\n","protected":false},"excerpt":{"rendered":"By Damian Hackett \u2013 Director and Senior Partner at Last Mile Consulting Damian Hackett From Wiggle\u2019s \u00a397m losses…\n","protected":false},"author":2,"featured_media":246278,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[569],"tags":[64,63,784,85],"class_list":{"0":"post-246277","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-cycling","8":"tag-au","9":"tag-australia","10":"tag-cycling","11":"tag-sports"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/246277","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=246277"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/246277\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/246278"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=246277"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=246277"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=246277"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}