Survival worth the risk for small businesses opting for UK emergency loan scheme

A survey from the British Chambers of Commerce (BCC) has found that a fifth of small businesses are planning to take advantage of the Government’s Coronavirus Business Interruption Loan Scheme. The scheme has been on the receiving end of heavy criticism since its inception, despite being expanded to help more businesses.

Weeks into the nationwide lockdown due to the Covid-19 pandemic, SMEs are scrambling to strengthen their cash flow. Out of the 1,000 businesses surveyed, 16% of respondents less than a month’s worth of cash in reserve, with 41% of businesses one to three months’ cash in reserve. These alarming figures shine a bright spotlight on the importance of the Government’s support package for SMEs.

The BCC’s survey showed that 59% of respondents knew the details of the Coronavirus Business Interruption Loan Scheme (CBILS) and 19% were interested in using the Scheme, with only 1% successfully accessing the funding.

Commenting on the survey’s results, BCC Director General Dr Adam Marshall said: “We are pleased that the Chancellor is listening and responding to our calls to strengthen the existing support. Improvements to the CBILS scheme should help more businesses get access to the cash they need over the coming days and weeks. This could be the difference between survival and insolvency for many firms.

“It’s vital that governments across the UK continue to work closely with business over the coming days. Every minute counts, and governments, local authorities and banks must do everything in their power to ensure support gets to firms on the frontline more quickly.”

Mike Haston, CEO of multinational private equity firm Leonne International, commented: “Covid-19 has had a devastating impact on the economy and British business, leaving thousands of start-ups, scaleups and SMEs with no option but to put in a plea for the emergency loan scheme, which so far has been negligent to smaller businesses in the UK, following reports of slow rollouts and penalising conditions which can only be deemed ‘harsh’ in the current climate.

“Many small businesses are in a unique, difficult situation, with thousands facing the very real prospect of having to close their doors for good. Fortunately, the UK emergency loan scheme and Treasury grants aren’t the only option for financial buoyancy. Such other alternatives with proven success, include opting for a private equity partner to buy shares in exchange for a cash-lifeline followed by deep investment in a business’s internal operations and offerings, for example.

“In this current climate, this might include assisting with the transition to remote working, or funding safer and more secure methods of manufacturing a given product.

“Of course, options for financial support all depend on the business and its offering – and decision makers in struggling organisations, particularly those working for SMEs, should consider seeking professional advice before making any solidified decision.”