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 months ahead - 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 what amount of financial support is needed for your business to survive the crisis. It's easy to downplay the figure, particularly against a rapidly-changing backdrop and some recent positive news with a loosening of lockdown restrictions.

But it’s important to remember that the UK’s route out of the coronavirus pandemic may be drawn out and not as straightforward as it might initially appear - signalled by the introduction of the coronavirus alert system with its five threat levels. It's possible that a lockdown may need to be reinstated again in future if reductions in transmission of the virus are not achieved, causing further disruption.

With this sign that the country’s recovery may be a slow process, it's prudent for small business owners to consider what this might mean for their finances for the remainder of 2020.

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 needed to apply for a second round of funding could be better spent picking up other activities.

Stay on top of Government support

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

NerdWallet recently commissioned a survey of 924 senior business decision-makers and found that 48% of UK businesses have furloughed staff, while 40% of firms have applied for a loan through CBILS. However, not all businesses have been successful with securing funding through CBILS. Many applicants have been rejected, with NerdWallet’s survey data revealing that 27% of those who successfully applied for a loan had still not received the money by the end of April.

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

In addition, the Government have launched a suite of other support schemes for businesses which certain businesses may be applicable for. They include:

If you are unsure which schemes your business may be eligible for, 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 are not the only providers 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 grant of up to £25,000 as part of the Business Support 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, The NerdWallet survey mentioned above found that 26% of UK business decision makers do not feel they have the expertise in-house to successfully apply for Government funding - while 31% of respondents have already brought in outside help to do so. 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.