A survey by invoice finance provider MarketFinance has found more than two-thirds of respondents (67%) believe government loans will not reach them in time and they will run out of cash before Easter (12th April).
The poll, carried out during 20-22 March, asked 5,000 business owners of UK Ltd companies (who employ between 1 and 249 staff), to give their views on the government’s Covid-19 funding scheme for SMEs.
The survey found that 80% of respondents reported a decrease in their revenues of between 40-50% during March.
Despite this shortfall in working capital, the poll found that only half (52%) of UK businesses are considering taking advantage of the Coronavirus Business Interruption Loan Scheme (CBILS).
Government-backed funding under CBILS – conducted through British Business Bank accredited lenders only – were unveiled by the Chancellor of the Exchequer during the March Budget and target UK-based businesses with an annual turnover of no more than £45m.
Under the scheme, SMEs can access funding of up to £5m (interest-free for the first year) over six years.
MarketFinance found that because most businesses (67%) have a pre-existing loan, their biggest concern (36%) is making repayments for any additional loan.
Invoice finance ranked highest as an alternative to taking a loan, with 48% considering this option over the next 12 months, to avoid the additional debt burden, MarketFinance found.
Business owners ranked a larger overdraft facility as first preference before seeking a business credit card and in third place, using invoice finance as a means to inject working capital into the business, MarketFinance found.
Anil Stocker, chief executive at MarketFinance, said: “Business owners are uncertain on revenue numbers for this year with a third expecting at least a 50% drop in sales and, rightly, are wary of taking on more loans that they might not be able to pay back.
“It’s important to realise that in the fine print, many banks will ask for additional security and Personal Guarantees for loan amounts greater than £250,000 of borrowings.
“The number of businesses that believe they won’t make it to Easter has doubled from a third to two-thirds despite the Treasury’s announcements. Time is of the essence”.
Most (35%) business owners are turning to their accountants for advice on what to do next before consulting their friends and family (21%). Only one in six are seeking advice from their bank manager on what to do. Business owners feel their accountants are the most accessible given the remote working environment, according to MarketFianance.
Anil Stocker added: “Economies around the world are in a state of shock. In the UK, the government has poured billions in subsidies, grants and guaranteed loans for businesses, but nobody can be sure how well the rescue will work and how this money will be propagated around the small business community.
“The government needs to urgently implement and deploy their policy announcements. Business advisers will play a key role in guiding businesses on the best finance options for them”.
The survey was conducted by LM Research Consultancy on behalf of MarketFinance.