Wednesday, September 23, 2020

Flexible financial support needed for firms to rebuild revenues post-pandemic

The results of a new poll reveal that many firms have taken on debt during the COVID-19 pandemic and now require flexible funding repayments solutions to rebuild the revenues.

The poll, conducted by the British Chambers of Commerce (BCC) in partnership with banking group TSB, found that 42% of those surveyed said that they had accessed finance during the pandemic through government lending schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS) or the Bounce Back Loan Scheme (BBLS).

These businesses were almost evenly spread across all sectors, with manufacturing firms slightly more likely to have taken out finance.

Those drawing on the schemes were overwhelmingly doing so to support critical day-to-day business operations during the pandemic. 71% said they used finance to support cashflow, 43% for overheads, 40% for paying staff and 32% for paying other debts.

64% of respondents said that the repaying of finance built up during the pandemic might have a negative impact on their business.

More than one in four firms (27%) said repaying finance might mean they scale down operations and 26% said they would change their investment plans. Most concerningly, 11% – more than one in ten firms – said they might have to cease trading.

Micro firms were more likely to say repaying debt may cause them to cease trading (15%) compared to non-micro firms (6%).

Innovative approaches to repayment and recapitalisation may be needed to prevent thousands of firms from falling into a spiral of unsustainable debt, BCC said.

The survey found that 18% of respondents said they would prefer a ‘student loan’ style scheme- where the loan becomes a contingent tax liability that is repaid on a means-tested basis – if their business was struggling to repay their loan.

16% said they would prefer a longer fixed term period to repay the loan. In contrast, just 4% said they would prefer to convert the debt into an equity stake in their business.

44% of firms surveyed said they had not attempted to access finance during the immediate crisis, but still face challenging business conditions. While 38% have seen increases in revenue from UK customers, a further 38% have seen a decrease. Half of firms (50%) said their cash reserves have slightly or significantly decreased since July 2020.

Faced with this, local lockdowns and the planned withdrawal of various government support schemes in the autumn, more businesses will likely access business banking services in the coming months to support their day-to-day operations and drive the wider economic recovery.

Those looking to do so overwhelmingly require a flexible business banking service, offering a mix of face-to-face and in-person capabilities. 48% of firms said they required personalised or face-to-face support. 44% said they valued digital services – like apps and websites –most highly.

A further 44% said fast and easy access to capital was most important and 36% said they preferred a presence in the local community.

“Over the coming months, government, regulators and banks must work together with business communities to find solutions that help firms repay coronavirus loans sustainably, and access the support and services they need at this challenging time,” said, BCC Director General Adam Marshall.

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