With the lockdown looking set to continue in some form or another for at least the next few months, small and medium sized businesses find themselves in quite an interesting situation. Depending on the industry they find themselves in, some might be looking at a loss in revenue as customers tighten their belts.
In an attempt to prevent many SMEs from shutting down in these difficult times the government has made a variety of public funds available. The focus on small and medium enterprise is not entirely new, with initiatives to support their growth having been put in place in recent years.
From the Coronavirus Business Interruption, to the Job Retention Scheme, and even to the Future Fund, the funds are being created to be supposedly accessed quickly and simply. Is it quite as easy though to actually access them for SMEs?
The first aspect to consider is the difference between a grant and a loan. As with most loans, those taken from public funds during this crisis will have to be paid back, no question. For SME founders, the challenge is that of short-term gain against the possibility of a long-term financial obligation.
At the moment, grants for SMEs are reserved for those in industries of “particular interest” and the smallest businesses. This means only those who were eligible for Small Business Rate Relief and SMEs in the Retail, Hospitality, and Leisure sectors are even able to access the current grants. This leaves so many SMEs out in the dark, with only access to limited loans to help them through.
Every business hopes to “bounce back” from the effects of Coronavirus as quickly and painlessly as possible. The Government hopes that this will be helped by the Coronavirus Bounce Back Loan Scheme. However, the main caveat of this scheme is that it is unavailable to any business that has already made claims under the Business Interruption Loan Scheme. In another twist, a loan taken out under the Business Interruption Scheme can be transferred to the Bounce Back Scheme, with a limit of £50,000.
For the business owner in these times, the deciding factor may simply be the feasibility of paying back a loan of that size in the timeframe put forward by the government. The interest-free period is only 12 months, after which it rises to 2.5%.
Business owners must make some pragmatic decisions regarding whether it will be possible to pay off the loan within the 12 months, or whether the interest will be worth the cost. Additionally, in a situation like this where no-one really has any idea when it will all be going back to normal, it might not always be so easy to see what the future holds.
We must also unfortunately deal with situations where an SME may not be able to bounce back. At the moment, there isn’t much support for those who may even be forced to shutter their doors due to the pandemic. We all have to come together and support each other during these incredibly difficult times.
We have faith though! There will be many SMEs that can survive these tough times without loans and grants. This will of course be easier for more established organisations, as cashflow is crucial for micro-businesses. We have also seen so many inspiring businesses pivot their model to continue working under the new guidelines.
What has also been very heart-warming to see has been SMEs across the country doing their part to support communities during these unprecedented times. Stories of independent food shops starting deliveries to help people who can’t leave the house have inspired us to support those around us.
It is clear that the Coronavirus pandemic poses a major threat to our entire business ecosystem, but we have faith in our entrepreneurs and their ingenuity and courage. We believe they will find a way to rise to the challenge and came out flourishing.