B2B Cashflow Solutions’ role in the business community is to source and structure funding to help businesses with working capital and growth, however, since COVID-19, available resource has been re-focused on helping businesses to re-negotiate existing debt profiles with banks and commercial lenders, including restructuring, repayment ‘holidays’ and re-financing to consolidate.
Simon Reynolds, Director, explained; ‘We believe we have a duty of care as a leading independent finance intermediary to engage with the government, national platforms which provide a collective voice, and local authorities to ensure we are fully informed and able to challenge on behalf of SME’s, many of which are under significant stress.
During this process we have experienced a variety of feedback from those delivering the government’s messages, and those desperate for help.’
Focusing on his first of two key areas of concern, Simon commented; ‘The government has rightly recognised employees and the self-employed, but has so far failed to recognise the owners of around two million ‘limited company’ SME businesses which, on advice from their accountants, are modelled on owners deriving personal income through declaring dividends on the profits they and their businesses work hard to achieve.’
Sole-traders and partnerships (self-employed) are being afforded support by way of an average of their last three years’ (as applicable) annual HMRC self-assessments, therefore the amount self-employed individuals paid themselves from the profits of their business will determine the level of taxable grants they receive (restrictions apply).
This group accounts for around 4 million businesses in the UK.
SME limited companies represent an estimated further two million businesses in the UK, and yet so far the owners of these businesses have been overlooked despite these business owners relying on profits to remunerate themselves in a similar way to the self-employed (albeit via the declaration of dividends).
Whether self-employed, or a business owner by way of company shareholding, these individuals take substantially all the risks to establish, build, finance, and manage their business. They also create significant employment along the way.
The government has rightly taken substantial measures to protect the employees of businesses across the UK, but without help for business owners of SME limited companies, there remains a real risk that an element of this investment will ultimately prove futile if employees are forced to apply for Job Seeker’s Allowance alongside their employers.
Progressing to his second key area of concern, Simon shared data published by UK Finance (the collective voice for the banking and finance industry) in regard to the new ‘Coronavirus Business Interruption Loan Scheme’ (CBILS), which states that CBILS is struggling to have the desired impact.
With just 2,022 loans (totalling £291.9m) having been drawn at time of publication despite just over 300,000 applications having been made so far, a paltry 0.65% of applications have resulted in a CBI loan.
Simon commented; ‘The speed at which these loans re being processed will be a major working capital issue to many businesses trying to survive with little or no income. I am also concerned that many of these applications have not progressed because loans under the scheme have been declined by the scheme lenders’.
While the statistics would appear to support Simon’s concerns, he added; ‘We are aware of this because of the feedback we receive from our Relationship Manager colleagues within the banks who contact us for assistance on behalf of customers they have declined under the scheme, and directly by businesses seeking alternative help having been declined under the scheme.’
In summary, Simon added; ‘It is feasible that delivery of taxable government subsidies to business owners of limited companies to bring them into line with employees and the self-employed would help them preserve cash reserves for longer, and therefore offer a better chance for their business to survive.
‘It may also relieve the strain on the banks and other scheme lenders in what is proving a difficult, and arguably ineffectual CBILS process, which it is clear needs urgent improvement to optimise the number of businesses which may benefit before it is too late for them.
‘My concern is that with so many businesses not generating sufficient income (If any) under circumstances with an unknown timeline, business owners may be tempted to apply for this additional funding simply to pay existing creditors, or to draw personal funds via Directors’ Loans.
Assuming it is unlikely that this additional debt will prove a positive impact on the ability for businesses to generate profits, I foresee a potential debt repayment ‘time-bomb’ for many businesses and their owners.’
If you would like to add your voice to the Coronavirus Support Package for Directors / Shareholders of small Limited Companies to provide a COVID-19 support package in line with that offered to the employed and self-employed, please follow the link: https://petition.parliament.uk/petitions/310515
