In the current economic climate, more businesses are likely to apply for government-backed loans as funds run low.
Government Funds Keep Businesses Afloat
Rishi Sunak, Chancellor of the Exchequer, gave an insight at the spending review of what the UK economy can expect. The demand for the government-backed CBILS loans is set to rocket as businesses find themselves without cash flow. Of those businesses who applied for the Bounce Back Loan during the summer (with a value of up to £50K), they only have £3,150 remaining for the rest of the week.
More CBILS Loans
Since the government implemented the second lockdown, 84% of businesses are set to apply for CBILS loans. The loans are set to protect them throughout lockdown as well as in anticipation of more bills, taxes or duties to pay. Additionally, more businesses know they can refinance their Bounce Back Loan with a CBILS loan – up from 68% two months ago to 83% today.
Anil Stocker, CEO of MarketFinance, commented: “The stop-start government announcements on lockdowns haven’t helped UK businesses. However, they continue to fight on and will, naturally, require more funds to bolster them through a tricky winter period. Looking ahead, ultimately, it will be the private sector which will enable the Chancellor to get the country’s finances back under control, so business leaders will be looking for some pro-growth, pro-enterprise stimulus measures in time to come.”
Cash Vacuum
A staggering two in five businesses (42%) are still waiting to be paid for work completed since the first lockdown. In June 2020 they were waiting for an average of £148,917 which dropped to £33,906 in September. Yet, despite the drop there is still an outstanding £27,134 owed to them.
Two-thirds of businesses reported waiting longer to be paid. One in five (20%) reported their payments terms from customers have been renegotiated to 3 months or more. The leisure, marketing and telecoms sectors are those which have waited the longest times to be paid.
With businesses getting paid later, nearly half are withholding supplier payments due to cashflow worries and fear of future economic shocks. A third (35%) of businesses reported intentionally stockpiling cash reserves to safeguard their companies ahead of the coming season.
Survival Prospects
Small businesses lack certainty for the future with more than a quarter fearing their survival prospects for 2021 based on current cash flow. According to the data, only 27% were certain about their survival for 2020. The most optimism was found in more experienced business owners and those based in London and the South East. Small business owners reported that an average cash injection of £52,800 could see them through the winter trading period.
