Fifth of SME owners have taken pay cut during pandemic
Nearly a fifth (18 per cent) of small business owners have taken a pay cut during the Covid-19 pandemic, new research has found.
Purbeck Insurance Services, which provides a personal guarantee insurance product, also found that 14 per cent had not paid themselves at all during the crisis.
The survey, based on feedback from small- and medium-sized enterprise (SME) workers, also revealed that a fifth confirmed the director of their company has a personal guarantee for a loan for the business.
80 per cent said their boss had been transparent with them about the firm’s finances during the pandemic and 50 per cent felt very supported by their employer.
Read more: Fifth of SMEs unsure if they will ever reopen
“Transparency creates trust, making staff feel included and valued but it also helps them understand exactly what’s at stake for the owners of the business,” said Todd Davison, managing director of Purbeck Insurance Services.
“Based on our survey, one in five owners and directors of SMEs are shouldering huge personal financial risk because they have put their home and other personal assets on the line for a business loan by providing a personal guarantee to the lender.
“It is their responsibility alone to settle the debt if the business fails unless they have personal guarantee insurance in place.
“Our additional concern is the SME owners and directors who have taken the serious step of not paying themselves – a situation that for most will be unsustainable.
“If SME owners start to look round for finance independent of any government support it is vital they look at the ways they can mitigate the risk of a personal guarantee backed loan as the options outside of this type of loan could become quite limited.”
Read more: Record numbers of SMEs are getting approved for finance
The research found that nearly a third (29 per cent) of SME works said they have carried on business as usual with no government support needed, or cost cutting in the business.
And 31 per cent of workers for SMEs were confident about their job prospects.
Of the measures available to support SMEs during the public health crisis, the furlough scheme was most popular, with 59 per cent of respondents saying their firm had used this. This was followed by the government loan schemes (18 per cent), redundancies (17 per cent) and seven per cent sought finance independently.
In April, Peer2Peer Finance News revealed that top executives at several peer-to-peer lending platforms, including Funding Circle, Assetz Capital and Lending Works, had taken a temporary pay cut during the Covid-19 crisis.
