Covid-19: Financial Support for UK SMEs

Covid-19: Financial Support for UK SMEs

Nic Redfern, UK Financial Director of NerdWallet​, explores the financial support available to UK SMEs during the coronavirus pandemic

By Nic Redfern

The coronavirus pandemic has caused many sectors of the UK economy to effectively grind to a halt, leaving large numbers of small businesses requiring emergency funding to stay afloat. In this guide, we explore five ways to secure financial support that could make a difference to navigating the crisis - particularly as it becomes clear that a return to normality may be a slow process. 

Get your house in order

Whether you’re looking for a Bounce Back Loan, Coronavirus Business Interruption Loan or any other form of investment, convincing a lender to put money into your SME requires them to have a clear view of your company’s finances. With that in mind, ensuring your accounts are up-to-date is essential.

Lenders will want to be clear about any existing debt that your business has, as well as potential incomings, such as outstanding invoices, the value of stocks, or other assets that the business owns.

Bringing all accounts up to date is a good place to start, logging everything that has come in and gone out over the last five to ten years – or as long as the business has been running. This will allow a lender to establish the financial strength of your business beyond any immediate cash flow issues caused by the coronavirus pandemic.

Avoid thinking too small

Carrying out this due diligence will also give you a much clearer idea of exactly how much financial support is needed for your business to survive the crisis. It’s important to remember that the UK’s route out of the coronavirus pandemic may be drawn out and not as straightforward as initially thought by some - signalled by the prolonged enforcement of strict government measures since the first lockdown back in March 2020. 

The country’s recovery may be a slow process, so it's prudent for small business owners to consider what this might mean for their finances as restrictions continue into 2021. 

It’s important to remember that if you don't get enough financial support the first time around, then you will likely need to repeat the process in the future. And, with many small businesses furloughing their staff, chances are that the time taken to reapply could be better spent on other activities.

Stay on top of Government support

The UK Government has created a series of schemes offering funding to help businesses survive the coronavirus pandemic. Two of the earliest examples were the furlough scheme and the Coronavirus Business Interruption Loan Scheme (CBILS). 

According to a survey commissioned by NerdWallet in April 2020, 48% of UK businesses had furloughed staff, and 40% of firms had applied for a loan through CBILS. However, not all businesses have been successful with securing funding through CBILS. Many applicants have been rejected, and others have faced delays. NerdWallet’s survey data, for example, revealed that 27% of those who had successfully applied for a CBILS loan had not received the money by the end of April.

For those that have been unsuccessful through CBILS, an alternative is the Small Business Bounce Back Loan Scheme which – unlike CBILS – is 100% backed by the government. As lenders do not have to absorb any losses if borrowers cannot repay all of the debt, more applicants should be successful.

Since the start of the pandemic, the Government has launched a suite of other support schemes for businesses for which certain businesses may be applicable. These have included:

If you are unsure which schemes your business may be eligible for, and which ones remain available, the government has provided a business support finder tool to help identify options based on a simple questionnaire.

Seek grants and financial relief from other sources

The UK Government is not the only provider of support during the pandemic, with options available from both the public and private sectors.

If your business is based in Scotland, then you may be eligible for a monthly grant of up to £3,000 as part of the Strategic Framework Business Fund. Similar schemes are also available in Wales and Northern Ireland.

There are also sector-specific grants and funding options available for businesses in specific sectors such as charities, community organisations, and industries that have been especially hard hit by social distancing measures. Grants Online have a list of such schemes on their website.

If your business is backed by equity investment then it’s important to ensure your investors are kept informed about your business’ finance needs. It’s essential to know where your investors stand – is your business still their priority in the crisis, or has their ability to provide funding been impacted by other holdings in their portfolios?

Final thoughts

Although there is plenty of support available to UK SMEs, there has been some confusion within the business community about how to successfully apply for funding. If the above steps sound daunting, it's important to know that help is available and business owners should not feel isolated. If you're feeling a similar way, please seek advice from expert brokers and intermediaries who can guide you through how to secure funding.

About the Author

Nic Redfern is UK Financial Director for NerdWallet. As an independent financial comparison website, NerdWallet provides consumers and businesses with useful tools and insights so they can make smart money moves. From choosing a bank account or breakdown cover to buying a house, NerdWallet is there to help individuals make financial decisions with confidence.