Will the Bounce Back Loan Scheme be enough to save small business?

The angry voices from small business owners are getting louder and it seems that the Chancellor has heard their calls loud and clear.

Yesterday, Rishi Sunak unveiled a new Bounce Back Loan Scheme that could provide SME’s with loan funding of up to £50,000, coupled with the promise that this cash could be accessed quickly and without the cumbersome application criteria for which the Conoravirus Business Interruption Loan Scheme has been so harshly criticised.

The loan scheme, which is open for applications from 9am on Monday 4th May has just two pages of forms to complete, is not based on business viability and the business owner can ‘self-certify’ their income (no evidence is being asked for submission) and most importantly, the Government is underwriting 100% of the loan. A business can borrow up to 25% of their turnover.

But is it enough to save small businesses from collapse?

Research published by The Small Business Academy, a UK small and start-up business support hub, reveals a much greater impact on the survival of small businesses than perhaps even the Chancellor had expected. Their study of 470 business owners with fewer than 50 employees revealed that a worrying 18.10% of those who participated in the survey are reliant on State benefits to survive and 24.58% of businesses said there’s a ‘Good chance they will have to close’

When asked about their current business revenues, 56.78% advised that they have ‘little to no revenue’ and a further 24.45% indicated a ‘substantial loss’ in revenue – equating to 81.36% of businesses who have lost most, or all of their business income.

A spokesperson from The Small Business Academy told Business Matters, “We are receiving a large volume of emails and calls from anxious business owners who have absolutely no income whatsoever. They are mostly sole directors of a small business, employing just a handful of people and working out of Co-working Spaces and serviced offices that do not qualify for the grant scheme.

If they ‘furlough’ themselves as a sole director they cannot perform any activities save for statutory responsibilities and this would mean they have no business to come back to when they can resume normal trade.

Many of our members have told us that there is an unfair disparity between them, and everyone else. Where the self-employed can receive 80% of their profits and continue working, and employees can receive 80% of their wage but get a second income by taking a job in Tesco, the only thing we are being offered is debt. Debt that we are aren’t even sure if we can repay”.

What do small business owners need?

It seems unlikely that the Chancellor is going to allow any wiggle-room to permit directors to claim their salary via the furlough scheme and continue trying to generate income, but further clarity is needed on the Bounce Back Loan Scheme.

It is currently unclear whether a Personal Guarantee will need to be provided, if not, this would not only be unfair for sole-trader applicants who would remain personally liable but would create the potential for applicants to secure funds before folding their business.

However, if a Personal Guarantee is required, how many business owners are prepared to be burdened with debt that they may be personally liable for, when there is no road map on offer as to when they can begin trading again?

The Government has made clear that lockdown measures will not be lifted until five tests have been satisfied, but without at least some provisional indication of when businesses can resume trading it is impossible for SME’s to plan their future, or know how much financial support they need to survive.


Nikki Hesford

Nikki Hesford is an award-winning entrepreneur having appeared on Dragons Den in 2010 before securing £250,000 of angel investment to scale up her fast-fashion brand. Exiting the company in 2015 for a slower pace of life with her young family, Nikki now works with small and start-up businesses to create attention-grabbing Marketing, Social and PR strategies from small budgets.

Nikki Hesford

http://www.nikkihesford.co.uk

Nikki Hesford is an award-winning entrepreneur having appeared on Dragons Den in 2010 before securing £250,000 of angel investment to scale up her fast-fashion brand. Exiting the company in 2015 for a slower pace of life with her young family, Nikki now works with small and start-up businesses to create attention-grabbing Marketing, Social and PR strategies from small budgets.