SME's worried as loans dry up and no-deal Brexit looms

Small and medium sized enterprises (SMEs) in the UK are left worried as cash from the government’s Bounce Back Loans Scheme (BBLS) is running low and the deadline for the Coronavirus Business Interruption Loan Scheme (CBILS) is at the end of September.

According to research by Market Finance, over 1.2 million (39%) SMEs took on a BBLS to pay their suppliers, with 29% of firms bolstering their business by setting up e-commerce and online shopping channels.

Worryingly, SMEs only have an average of £9,106 ($11,800) remaining of their Bounce Back loans, with the majority expecting to run out of funds by the end of this month — 6% have said they paid back their loan.

As 2020 draw to a close, two-thirds of small firms believe that a no-deal exit presents huge risks for their business. With most of them concerned about available workforce, not having the information to guide them on how to do business and the impact on supply chains at borders.

Many companies are also concerned about the rise in COVID-19 cases, with more than two thirds, or 65% reporting a second UK lockdown could lead to supply chains being impacted causing delays in sales and payments.

READ MORE: UK firms warn on 'triple threat': Local lockdowns, furlough wind-up and Brexit disruption

The CBILS is due to end at midnight on 30 September with applications submitted before this deadline being valid for processing until the end of November.

While 77% of SMEs are aware of the CBILS, 68% said they know they can refinance their Bounce Back loan using the incentive.

Of those surveyed, 76% would be open to have a CBILS facility “on ice” in case they need it later in anticipation of larger bills and taxes due towards the end of the year. But, almost two thirds (63%) aren’t aware of the 30 September deadline.

Meanwhile, 77% believe they will only hit 50% of their 2019 revenues, while two thirds are still waiting to be paid for work they did pre-lockdown amounting to £33,906, on average. This is an improvement from June 2020 when they were waiting for £148,917.

Over half (56%) believe seasonal demand will be lower than last year due to the ongoing impact of the coronavirus crisis.

READ MORE: Predictions for UK economy stop getting worse — but remain dire

Anil Stocker, CEO at MarketFinance, said: “The Bounce Back Loan Scheme was a good short term fix for SMEs. It provided the necessary support during the lockdown but looking ahead, the CBILS cash will provide the impetus to do more.

“It's essential that businesses start looking beyond simply survival and begin evaluating how they can adapt their business to these Covid-conditions.

“There might be new ways to change the business model and get growth going again... Securing government-backed funding now, before the deadline, is an opportunity for businesses to access the working capital they need to build for the longer term.

“The idea of these being ‘unprecedented times’ has been thrown around a lot this year. Initiatives like the CBILS offer similarly unprecedented access to fee and interest-free funding — but only for a limited time.”

The survey was based on 2,000 UK companies with a minimum turnover of £250,000.

Last week, Ruby McGregor Smith, president of the British Chambers of Commerce (BCC) wrote to prime minister Boris Johnson warning of a “difficult winter ahead” even without a resurgence of the coronavirus.