Rishi Sunak’s promise to do “whatever it takes” to save the economy means that SME businesses, which account for more than 60% of total employment and just over half the turnover of the UK private sector, must survive this crisis.
However, hundreds of thousands of businesses are still waiting for emergency grants and loans as the government faces a “crunch week” for its coronavirus support measures for SMEs.
The much applauded £350Bn SME Support package seems to be falling way short of its initial promise and if significant progress is not made this week, literally hundreds of thousands of companies could go into insolvency because they won’t have the cash to make payroll this month.
Local authorities and banks are coming under increasing pressure to speed up the provision of cash to the SME businesses that are fighting for their survival.
The Small Business Grant of £10,000 is available to any business that receives Small Business Rates relief. In addition to the SBG any business in the Retail, Hospitality or Leisure industries can receive a grant of up to £25,000 dependant on the rateable value of their business premises. The grants are being administered by Local Authorities and businesses were advised that they wouldn’t have to apply for this that it would be automatically disbursed.
Figures from the Local Government Association show that councils in England have paid out only about £1 billion to about 100,000 small businesses. However, billions more is yet to be paid, with experts warning that employers are facing a “postcode lottery” as some Local Authorities have introduced an applications system to access the grants further delaying the payouts.
The Federation of Small Businesses, said that thousands of companies would need funds in the next few days and that this would be a “crunch week” for the grants.
Meanwhile the Coronavirus Business Interruption Loans Scheme (CBILS), which is the second pillar of the Governments £350Bn SME Support package, continues to disappoint many small business owners 3 weeks after it’s launch.
Over the weekend it emerged that just 1.4% of firms enquiring about CBILS loans had actually been successful. Business secretary, Alok Sharma, admitted yesterday that “more money needs to go out faster” to applicants as pressure mounted on officials and leading banks to speed up the applications process before businesses go bust.
He confirmed that as of yesterday about 4,200 loans totalling around £800M had been approved from over 300,000 applications.
Whilst this number is still dreadfully low it is a marked increase on the 2,500 loans totalling £450M only 48 hours previous.
Further hope that CBILS may finally start delivering came with the announcement that the British Business Bank has approved 5 new lenders to the scheme including Starling Bank, OakNorth Bank and Cynergy Bank.
It is understood that some non-bank lenders including Funding Circle, Iwoca and Market Finance, which together have provided loans worth billions of pounds to small companies, are hoping to be approved to join the programme this week.
Much of the criticism of the scheme stems from its failure to get money to the front line quickly enough, this has been attributed in part because of its initial reliance on large traditional lenders. Banks have been struggling to cope with the level of interest in the scheme and the issue has been exacerbated by staff absences and call-centre closures.
The alternative lending platforms and fintech businesses may well be the answer and I, for one, would argue that they should have been included earlier since their technology allows them to make much faster lending decisions.
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