More than two thirds (67 per cent) of business owners believe funds from the government’s coronavirus business interruption loan scheme will not reach them in time and they will run out of cash before Easter.
According to new research from alternative business lender MarketFinance, only half (52 per cent) of UK businesses are considering taking advantage of the scheme, which offers up to £5m over six years – interest free for the first year – to shore up their businesses.
“Business owners are uncertain on revenue numbers for this year with a third expecting at least a 50 per cent drop in sales and, rightly, weary of taking on more loans that they might not be able to pay back,” said Anil Stocker, chief executive at MarketFinance.
“It’s important to realise that in the fine print, many banks will ask for additional security and personal guarantees for loan amounts greater than £250,000 of borrowings.
“The number of businesses that believe they won’t make it to Easter has doubled from a third to two thirds despite the Treasury’s announcements.
“Time is of essence. It is imperative that businesses are made aware of how to access the measures they have announced but also to widen the range of finance options available to them.”
Because most businesses (67 per cent) have a pre-existing loan, their biggest concern (36 per cent) is making repayments for any additional loan.
Invoice finance ranked highest as an alternative to taking a loan, with 48 per cent saying that they would consider this option over the next 12 months, to avoid the additional debt burden.
With revenue at companies across the country being hit hard, 80 per cent of businesses reported a decrease this month of between 40 to 50 per cent.
They are seeking immediate measures to ease this pressure on cashflow.
Business owners ranked a larger overdraft facility as first preference before seeking a business credit card and in third place, using invoice finance as a means to inject working capital into the business.
And more than a third (35 per cent) of business owners are turning to their accountants for advice on what to do, while one fifth (21 per cent) would rather consult their friends and family.
“Economies around the world are in a state of shock,” Stocker said.
“In the UK, the government has poured billions in subsidies, grants and guaranteed loans for businesses, but nobody can be sure how well the rescue will work and how this money will be propagated around the small business community.
“It is critical that business owners have a prepared mindset for all scenarios. They will be heavily reliant on all their advisers – accountants, bankers and boards – to help them navigate the turbulence ahead.
“The government needs to urgently implement and deploy their policy announcements.
“Business advisers will play a key role in guiding businesses on the best finance options for them.
“It’s imperative they are up to speed with all the necessary information and nuances of what is available.”