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How SMEs can finance post-Covid-19 recovery

The light at the end of the tunnel is getting brighter and brighter, but the fact remains that Covid-19 has had huge impact on the small business sector. And now firms must find the resources to finance regrowth and recovery. How can they afford it?

The launch of the Recovery Loan Scheme marks a new stage in the provision of economic support for businesses – it will help firms access capital as, hopefully, the economy reopens and the country moves out of the pandemic crisis. It replaces the Bounce Back Loan scheme and Coronavirus Business Interruption Loan Scheme, and is a critical initiative for businesses.

However, while the government’s emergency business loan schemes and tax relief measures have been a lifeline for firms, in particular smaller ones, and have helped businesses keep their heads above water, now these companies have to prepare to get swimming again, eventually unaided. Recent figures on the impact of Covid-19 underline how difficult this will be for many firms.

According to new research from CapitalBox, over two thirds of SMEs in the UK have had their cashflow negatively impacted during the pandemic. A third of firms affected have been unable to reinvest in their business as a result, while a quarter have been unable to pay their employees and 15% haven’t been able to meet loan and debt repayments.

How can SMEs protect cashflow in post-Covid-19 economy?

As Covid-19 restrictions are gradually lifted and the impact of the vaccination programme grows, businesses will return to some kind of normality. But this step will take investment, in everything from physical structures and new staff to digital services and cybersecurity. And, of course, government loans will have to be repaid. The pressure on cashflow and capital reserves will be significant.

How will small businesses, already hamstrung by the impact of the pandemic (as the study form CapitalBox shows), balance the books in order to afford to reopen and target essential recovery and regrowth? Awareness of all funding options will be critical, including the services of alternative lenders.

SME Covid-19 recovery and how alternative lenders can help

With regard to the alternative lending sector, in the wake of prolonged caution from traditional lenders, which is an issue that has returned during the coronavirus pandemic, alternative finance facilities such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target regrowth.

Notably, alternative lending is playing a prominent role in government emergency support schemes. A key part of the now closed Coronavirus Business Interruption Loan Scheme, invoice finance and asset finance us integral to its replacement, the Recovery Loan Scheme. Invoice finance and asset finance between £1,000 and £10 million per business are available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

Post-Covid-19 regrowth and SME finance options

Most small businesses feel sufficiently supported by the government during the pandemic, but Covid-19 has left many notably weakened. How these firms manage the next six months will be critical to their futures and that of the economy. Regrowth and recovery will require investment and to be able to afford this and safeguard cashflow at the same time, owners need to be aware of all the funding options available to them, including alternative finance services.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.

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