Study suggests some SMEs will struggle to secure government cash in coronavirus lockdown.
Almost a fifth of UK small businesses are at risk of collapsing within the next month as they struggle to secure emergency cash meant to support them through the coronavirus lockdown, according to research by an accountancy network.
The UK Government has pledged unprecedented aid to companies to try to cushion the blow from much of the economy shutting down but businesses and politicians have raised concerns that there are gaps in the schemes.
Some 18% of small and medium-sized enterprises (SMEs) either probably or definitely will not be able to obtain additional cash from the government to survive for a four-week period. This is according to the Corporate Finance Network, whose accountancy firm members estimated that almost a third of their 13,000 small-company clients from around the UK would be unable to acquire the cash needed to ride out an extended, three-month lockdown.
Some MP’s have voiced concerns over the Governments “bail out” measures. Those concerns include the fact that many banks are seeking personal guarantees in the form of savings and mortgages to secure lending to small businesses under the government’s hastily formulated Coronavirus Business Interruption Loans Scheme or CBILS. They also mention some of the banks offering the government-backed loans were putting in place “punitive” interest rates that made it impossible for companies to borrow money.
Rachel Reeves, the Labour MP who heads the business select committee said “The challenge now is getting the money out of the door to support businesses before it’s too late,” during an interview with BBC radio. “There are many businesses who if they don’t quickly access this cash they are going to go under. “That will have huge consequences for employment and also our ability to grow the economy when this pandemic has passed. If businesses collapse they won’t be able to ensure our economy can recover. They will be lost for ever.”
The British Business Bank, in charge of the Coronavirus Business Interruption Loans Scheme, has allowed Banks to set their own criteria for lending and security required under CBILS.
“Banks were kept afloat by government and taxpayers during the financial crisis,” Reeves wrote. “I would urge them to play their part in helping small and medium-sized businesses through this crisis.”
Taken from source: Almost a fifth of small businesses ‘at risk of collapse within month’ | Business | The Guardian
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