Is it really just two weeks since rookie chancellor Rishi Sunak unveiled his first budget? Since then, the scale of the measures needed to mitigate the impact of the global pandemic has led one Conservative cabinet minister to comment: “We’ve just nationalised the economy.”
A £330bn package of financial support was just the start of a raft of measures to help companies and workers across the UK. But as the civil servants charged with implementing these initiatives scramble to organise a nationwide bailout on an unprecedented scale, firms needing short-term financing are frustrated that various schemes are open for applications but do not have a confirmed timeframe for when funding will be received.
Keep your eye on the news
“The unknown at the moment is the timing on when you’ll get the cash,” says BOOST&Co’s London-based principal Richard Hallett. “It might take a bit of time for funding to come through. It’s a fluid situation, so everyone needs to keep their eyes on government reviews and announcements, as and when they come.”
One initiative that may prove particularly valuable is the Coronavirus Job Retention Scheme, through which the government will pay 80% of employees’ salaries. “Some of BOOST&Co’s portfolio companies have already started to contact me about this,” Hallett says. “It’s important for SMEs that employ someone for whom there isn’t a role for a few months – for example, a PA who sits on the front desk in an office that is closed. You’re foolish if you’re in business and you don’t look at it.”
Review your cash flow every day
Hallett’s key message is that companies should review their cash flows every day. “Funding via the Job Retention Scheme, for example, won’t be available until April, so businesses still need to find payroll for March. Even if they can do that, they will have to claim back the costs of ‘furloughed’ staff and still find payroll for April, which is challenging if receivables are drying up. So, cash is absolutely king until the pandemic begins to die down,” he says.
“You need to be looking at – and stress-testing – your cash flows every day, as well as using the government’s support in whatever way you can,” Hallett says. “I don’t think the loan scheme will be accessed by as many companies as the government expects, but payroll schemes and initiatives such as deferring VAT payments definitely will. Those will be the tools that people use to save cash.”
Specialist lenders are ready to help
Another key initiative is the Coronavirus Business Interruption Loan Scheme. This will be administered by 40 accredited lenders, including all the major banks, but Hallett argues that specialist lenders need to be involved. “It makes sense for SMEs to come to us, as well as the banks, because if a bank is going to lend, it has to do due diligence and there’s little time for that,” he says. “It’s better for the money to come through us because our investment team can act quickly.”
Currently, our fastest way to provide funding is via receivables financing. Our funding partner Growth Lending Limited operates under the brands GapCap Limited, for SMEs needing single invoice financing or invoice financing facilities up to £5m; KX Media (formerly FastPay UK), for media companies requiring invoice financing facilities up to £10m; and BOOST&Co’s accounts receivable product, for SMEs needing financing facilities of up to £15m.
These brands make their own decisions, but they are part of the same group and can all help with access to short-term financing (typically one to two weeks for simple facilities). Please contact Jack Trowbridge to discuss your options.
Brace yourself for ‘corona taxes’
It may be too soon to say, but what does Hallett think the future holds for the UK economy? “I keep war-gaming and trying to figure out what’s going to happen, but what the world looks like on the other side is anyone’s guess,” he says. “There’s going to be a fairly sharp and chunky recession; I think it will be worse than 2008, but it might not last as long.
“The fear will go once the virus disappears; at that point, it’s a question of whether companies have survived. And if the government is going to pump billions into the economy, the money has to go somewhere – but where does it go? After the last financial crisis, a lot of the quantitative easing ended up in the stock market, so we’ll see.”
Has the government done enough so far? “I think they’ve gone above and beyond; the issue is how they get the money out there and whether they can do it quickly enough. The measures are there, but it’s going to cost an awful lot of money, which will have to be paid back in higher taxes,” Hallett says.
“There will probably be ‘corona taxes’ for the next few years. The government can potentially sort it out if it taxes higher earners or those in certain tax brackets an extra £1,000 or £2,000 a year, but a lot will depend on the total amount it has borrowed to mitigate the crisis.”
Think as positively as you can
Ultimately, then, the message is one of hope, despite the unprecedented disruption and sense of helplessness that the pandemic has brought to the UK. Keep up-to-date on the latest economic measures, make the most of the government’s initiatives, monitor and stress-test your cash flow, keep talking to your lenders – and see you on the other side.
Contact Jack Trowbridge at our funding partner Growth Lending to discuss short-term financing
Get our comprehensive guide to the government’s support for business here
Read the government’s guidance on its initiatives here