The coronavirus lockdown is affecting businesses of all sizes across all industries.
Although the government has announced a series of loans and grants to help businesses with wages, cash flow and sick pay, SME owners across the country have found that banks are rejecting their applications due to overly-stringent lending criteria, and even the flagship Coronavirus Job Retention Scheme could see businesses losing much-needed money.
What’s the problem with the Coronavirus Job Retention Scheme?
Already cash strapped SMEs across the country will be (up to) £20b out of pocket when the first round of salaries are paid to the 8 million people currently furloughed through the Coronavirus Job Retention Scheme (CJRS).
Businesses must pay staff and then reclaim the money from HM Revenue and Customs (HMRC) online from this week, but firms are not expected to start receiving rebates until at least the end of April, and maybe even longer.
What are UK business owners saying?
Emma Loisel, chair and co-founder of coffee wholesalers Volcano Coffee Works commented: “The furlough scheme is most helpful, but timing and speed of payments is key. Even though 90% of our customers have closed, most of our business operating costs continue. We are monitoring our cash flow on a daily basis. Employees are a big part of our costs. We furloughed two thirds of our team in March, so we have already paid upfront for furloughed staff last month. Now we will pay another month before being reimbursed by the Government. This is causing a huge dent in our cash flow and makes it hard to focus on everything else we need to do to ensure the business gets through this.”
What are the business finance experts saying?
Fintech business lender MarketFinance has stepped in to help SMEs bridge the gap between paying furloughed staff and waiting for their CJRS claim to be paid by HMRC. Having delivered invoice finance solutions since 2011, MarketFinance has pivoted their tried and tested model to provide funding against HMRC payroll rebates. Where invoice finance has up until now seen businesses advanced money owed to them in outstanding invoices, MarketFinance will now offer the same cash flow solution to SMEs looking to advance funds owed in CJRS claims. Businesses will initially be able to apply for funding facilities up to £150,000.
Anil Stocker, CEO at MarketFinance, commented: “With April’s payday looming, it is essential that the HMRC application process is smooth and that payments are made as soon as possible. Any delay would exacerbate the cash crisis many companies are facing and could threaten jobs and the survival of these businesses.”
“We’ve been advancing cash to businesses since 2011 against invoices with long payment terms. We have perfected this model over the years and, now, in less than 48 hours have quickly adapted our model to meet the current needs of business. These vulnerable businesses, already very short on cash in the bank, will face yet another pressure by having to pay salaries for furloughed employees and then reclaim it days later.”
Rashesh Joshi, Managing Director at Alexander Rosse Chartered Accountants commented: “If you think of the maths at the most basic level, business owners have received less that £2b from the CBILS scheme and yet they are likely to be out of pocket by £20b for days by HMRC which is inevitably leading to massive cash challenges. Something is not quite right here. Moreover, it is unknown if HMRC will be able to provide these funds on time, stressing the cash position of businesses and challenging one of the key objectives of this policy: the protection of business activity and employment.