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SME survey reveals financing drought which is stalling growth as RLS loan deadline passes

More than one in five (22%) small and medium sized enterprises (“SMEs”) that needed external finance and/or capital over the last couple of years were unable to access it.

Indeed, over a quarter (27%) have had to stop or pause an area of their business because of a lack of finance. This is according to new research commissioned by Manx Financial Group PLC (AIM:MFX), the financial services group which includes, amongst other operating subsidiaries, Conister Bank Limited (“Conister”), Conister Finance & Leasing Limited and Blue Star Business Solutions Limited.

The research showed that the biggest barriers faced by SMEs in sourcing external finance/and or capital were that it was too expensive (23%), the process took too long (19%) and that there was a lack of flexibility with repayment terms (17%). SMEs also cited other barriers such as the fact that the lender didn’t understand their business (16%) and that they received poor customer care (10%).

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The research also revealed that SMEs have been forced to pause or stop activities such as expanding into new markets, hiring the right personnel and marketing, because of lack of financing. Manufacturing, Finance & Accounting, Retail and IT & Telecoms were the sectors that were affected the most because of a lack of external finance and/ or capital.

Over the next 12 months, nearly two in five (38%) SMEs believe Sales will be the biggest areas of business that will see growth followed by recruitment (19%), new product development (18%) and new market expansion (17%).

The research also highlighted that a third (34%) of SMEs are concerned that their business will not grow in the next 12 months. However, with appropriate external finance, SMEs on average believe their business could grow by around 17%.

Douglas Grant, CEO of Manx Financial Group PLC said, “The research sadly reveals what we have been observing for some time – that SMEs continue to struggle with accessing finance and that worryingly, this lack of availability will cost them and the UK economy in terms of growth at a time when it is needed the most. The amount of growth that is being sacrificed is however significant and will require new solutions which are designed to address this funding gap.”

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On 6 April 2021 the Recovery Loan Scheme (“RLS”) was launched. A new Government-backed initiative designed to help facilitate businesses’ recovery and growth after the disruption caused by Covid-19, allowing firms of any size and sector to apply for funding of up to £10 million from accredited lenders.

Conister was approved in August 2021 as a British Business Bank accredited lender for the RLS. It enabled Conister to extend the support it has provided to SMEs throughout the Covid-19 pandemic. The scheme deadline is today (30 June) meaning capital-starved SMEs, still recovering and adapting to a post-pandemic landscape, will need to source alternative forms of lending.

Some sectors of the economy are recovering more rapidly than others. For those still struggling sectors, they require an additional government intervention, but for the remainder, no further Government intervention is necessary.

Grant added, “We were delighted to have been accredited for the RLS last year. The programme provided the necessary catalyst that many sectors required to thrive.

“However, this lifeline is now going and demand for working capital is set to soar to new highs as more businesses desperately require liquidity provisions to counteract record inflation levels, rising interest rates, supply chain issues, increases in wages and additional pandemic-induced headwinds. With the cost of borrowing set to increase, many SMEs are facing their own cost of living crisis.

“A sector focused government-backed loan scheme which brings together both traditional and alternative lenders to guarantee the future of our SMEs in struggling sectors, is critical to ensure that opportunities for their growth are not missed. We very much hope this is something that becomes a reality.

“In the meantime, all SMEs would be well-advised to take stock of their current capital structures and, if appropriate, access fixed term, fixed rate loans to prevent additional exposure to an increasingly volatile lending market.”

By Lib Finance Reporter

Source: London Loves Business

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Commercial Finance – Business Interruption Loans and COVID

How COVID-19 Has Impacted Commercial Finance

The COVID-19 pandemic has left a lasting impact on many aspects of life, from restrictions on social lives, to businesses going into administration. Even though the UK economy is now experiencing a period of positive growth, mainly due to the pace of the vaccination programme, the financial impact of the pandemic is still very visible.

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Shortly after the first lockdown restrictions came into place, lenders were quick to tighten their lending criteria, to try and protect themselves from the expected risk of higher unemployment levels and people struggling to pay off mortgages and loans.

Commercial finance was affected in a similar way, with so many businesses being forced to close during lockdown, the commercial finance landscape lurched into unknown territory.

Many businesses were provided with financial support in the form of furloughing, business interruption loans and bounce back loans but others were unable to apply for these. Some lenders offered holiday payments for commercial finance, so there were numerous financial support options in place to try and help struggling businesses survive the pandemic.


Commercial Mortgages UK Adverse Credit and BTL

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With the reassurance of attractive Mortgage Protection Insurancee options, we also offer specialist mortgage broker services such as self-employed Contractor Mortgages, Expat Mortgages, home loans and Sharia Mortgages, to commercial Serviced Accommodation Finance from holiday homes to Property Investors, Developers and existing Homeowners.

Business Loan Applications – UK’s Changing Priorities

The priority for the government was to assist existing businesses, rather than helping new businesses to launch, which was highlighted by the financial support options that were made available. Startup loans were still available from some lenders but it was now harder for many would-be entrepreneurs to access loans.

In the UK, many people use startup business loans to buy the equipment and pay for other essentials when they start up a business. With the economic downturn, many lenders have withdrawn products from the market and tighter lending criteria was applied.

However, the Bank of England cut interest rates down to 0.1% which meant that some of the new business loan interest rates have been more attractive for startup business owners, but there is a more comprehensive set of lending criteria to enable lenders to manage risk in the unstable climate.

COVID Government finance support schemes for businesses

To assist existing businesses who had been adversely affected by coronavirus, the government introduced the following schemes to support cashflow during this challenging period:

Interest-Free Business and Commercial Loans

Coronavirus Business Interruption Loan Scheme (CBILS)

SME businesses have been able to access business interruption loans for lost revenue and cashflow disruptions. The CBILS was also made available to businesses whose growth requirement could not be supported under standard bank lending criteria. Under the scheme, businesses who had been adversely affected by the pandemic could apply for loans of up to £5million.

The first 12 months of the loan is interest-free and the interest rates after a year for the CBILS scheme were set by the lenders. Some lenders provided the loans with an interest rate as low as 1.4%, while at the higher end of the scale, some lenders were offering the loans with a 8.9% interest rate. Terms were available for up to 10 years.

To encourage more lending, the government also guaranteed loan repayments, with the borrower being fully liable for the debt.

Lenders were able to provide the following finance under the CBILS scheme:

  • Term loans
  • Overdrafts
  • Invoice finance
  • Asset finance

Bounce Back Loan Scheme (BBLS) SME and Sole Trader Businesses

The Bounce Back Loan was aimed to support smaller businesses and sole traders, to provide them quick access to financial support. The scheme allowed businesses to borrow between £2,000 and up to 25% of their turnover (to a maximum of £50,000). For the first 12 months, there is no interest to pay and following that first year a rate of 2.5% would be applied.

The maximum loan length for the BBLS was six years and this scheme also came with a guarantee to the lender from the government for the repayment, with the borrower remaining liable for the debt.

Pay As You Grow (PAYG) Business Support

For businesses who took out the BBLS, the option for PAYG was later introduced to provide further support, allowing:

  • An extension of the loan term from six years up to 10 years, remaining at 2.5% interest rate.
  • Reduction of monthly payments by paying interest-only for six months. This could be requested up to three times throughout the term of the loan.
  • A repayment holiday of up to six months, which was only available once during the term.

Other financial support provided to businesses included:

Job Retention Scheme – Paid in the form of grants to pay 80% of the salaries of furloughed employees.

New Restart Grants – A one-off cash grant of up to £18,000 for businesses re-opening from April 2021, including pubs, hotels, restaurants, gyms, salons and clubs.

Business Rates Holidays – Business rates were cancelled for all retail, leisure and hospitality businesses for the tax year 2020-21 and up to June 2021, with a discounted rate for the remainder of the tax year.

Recovery Loan Scheme – This has replaced the BBLS and allows businesses to apply for between £25,000 and £10m. The government has given lenders an 80% guarantee for these loan repayments.

There have also been other schemes for different types of businesses, some made available through local authorities.

Commercial Finance Landscape Has Changed – Conclusion

COVID-19 has completely changed the landscape for commercial finance, particularly as the government has been compelled to step in to help save businesses from closure or building up unmanageable debts.

Lenders have been able to provide loans under the schemes with the security of knowing that the repayments are guaranteed by the government, which has helped them to continue providing finance to businesses when the risk to them is extremely high.

The success of the UK vaccination programme has already had a significant impact on economic recovery in the UK and the combination of this, along with the support that the government has provided will certainly have saved many businesses which otherwise would have gone into administration.

Experts are predicting that over the next few years should hopefully see a shift back towards the type of commercial finance products that were available pre-COVID, albeit with stricter lending criteria until we see a full economic recovery.

Commercial Finance Network is a specialist Commercial Finance Broker offering all types of commercial finance to SMEs along with individual investors. Get in touch today via either our Contact Form or call us on 03303 112 646.

Commercial Business Finance – The Rise of AI In The Banking and Lending Circles

June, 2017 archives: “Artificial intelligence can help people make faster, better, and cheaper decisions. But you have to be willing to collaborate with the machine, and not just treat it as either a servant or an overlord,” says Anand Rao, PwC Innovation Lead, Analytics.

The quote neatly sums up our relationship with AI technology. Although we appreciate its potential, we feel edgy about its power and possibilities. However, despite this, it’s pervading our lives as consumers, whether we like it or not. Every time we receive a marketing email or product recommendation, we can be sure the algorithms have been at work and we are far from the random target.

Despite its image of being cautious and conservative, the banking industry as a whole appears to have had few qualms about adopting the technology – and it seems that, as consumers, we are happy with this. A mammoth survey of around 33,000 consumers by Accenture found that more than 70 percent of us would be willing to receive computer-generated banking advice. “Automated servicing can be the sole source of data from some customers, even when making complex decisions around products,” says the report.

One of the main uses of AI so far has been in customer service. Chatbots are becoming the de facto alternative to banking apps. This use AI to simulate conversion through written or spoken text. Just as Amazon has humanised its digital assistant by calling it Alexa, so has the Nordic banking group Swedbank created ‘Nina’. This chatbot is clearly popular; within three months of being deployed, Nina was averaging around 30,000 conversations per month.

However, this is the sharp end of AI – the human/machine interface mainly used in the consumer-facing world of retail banks. But how does – or will – AI play out in a commercial finance environment?

The business sector is understandably more cautious, prudent perhaps, about adopting new technologies until they have matured. But as millennials take up more senior roles in the commercial banking world, they will be increasingly pushing for the rich functionality they know as consumers to also be integrated into their working environment.

Today, we are seeing signs that adoption rates of AI-based technology are set to take off in business banking too. More and more banks are borrowing retail banking experience to build out their commercial and business strategies. But while the focus of its use in the retail banking world has mainly been for customer service and sales applications, in commercial banking, use cases (initially at least) are likely to be more around streamlining operational processes.

In a sense, AI as it stands today, in this environment is all about automation, about making processes faster and more efficient. And there are a raft of applications here where automation is having a hugely positive impact.

Take the introduction of digital expenses platforms and integrated payments tools, both of which have the potential to significantly improve a business’s approach to how it manages cash flow. By having an immediate oversight, through live reporting of all spending from business cards and invoice payments, as well as balances and credit limits across departments and individuals, businesses can foresee potential problems more quickly and react accordingly. All these services become even more powerful when combined with technologies like machine learning, data analytics and task automation.

We are already seeing growing instances of AI and automation being used to streamline payment processes in banks. Cards can be cancelled or at least suspended quickly and easily and without the need to contact the issuing bank, while invoices can also be automated, to streamline business payments. This means businesses can effectively keep hold of money longer and at the same time pay creditors more quickly. Moving beyond straightforward invoice processing, intelligent payment systems can be deployed to maximise this use of company credit lines automatically.

Looking ahead, we see a string of applications for AI in the payments management field around analysing data with the end objective of spotting anomalies in it. With the short and frequent batches of payments data used within most enterprises today, it is unlikely that even the best-trained administrator would be able to spot transactions that were out of the normal pattern. The latest AI technology could be used here to tease out anomalies and pinpoint unusual patterns or trends in spending that could then be investigated and addressed.

While this area remains in its infancy within the banking and financial services sector, with technology advancing, financial services organisations and the enterprise customers they deal with will in the future will be well placed to make active use of AI that will help clients track not just what they have been spending historically but also to predict what they are likely to spend in the future. AI will ultimately enable businesses to move from reactive historical reporting to proactive anticipation of likely future trends.

Source: Russell Bennett, chief technology officer, Fraedom

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Over 69,000 loans approved on day one of the Bounce Back Loan Scheme

More than 69,000 Bounce Back Loans worth over £2bn have been approved during the first 24 hours of the scheme.

The seven largest lenders (Barclays, Danske, HSBC, Lloyds, RBS, Santander and Virgin Money) received more than 130,000 applications on the first day of the scheme, which launched on Monday.

Chancellor Rishi Sunak said: “Small businesses will be the driving force of our recovery from the pandemic, creating jobs and securing economic growth.

“These loans will help them bounce back from this crisis – getting money fast – so it’s great to see close to 70,000 businesses benefitting in just the first day.

“It’s vital this speedy progress continues in the days and weeks ahead.”

Small businesses can get a loan of up to £50,000 interest free for the first 12 months, while the amount borrowed is capped at 25% of turnover.

Stephen Jones, chief executive of UK Finance, said: “Bounce Back Loans form a key part of support measures put in place by the government, working with the banking and finance industry to help businesses through these difficult times.

“This scheme gives smaller businesses including sole traders rapid access to debt finance if they need it. Bank staff have been working flat out since the scheme launched on Monday morning to process applications and get money out to eligible borrowers and these figures are testament to their hard work and the commitment of the industry to support businesses of all sizes.

“While businesses only need to fill in a simple form online to apply, it’s important to remember that this type of finance is debt, not a government or bank grant, and will need to be repaid by the borrower over the six year term of the loan.

“All businesses should consider carefully their repayment obligations before completing a Bounce Back Loan application. Under the terms of the scheme lenders are required to seek to recover any unpaid interest and principal on Bounce Back Loans from borrowers.”

BY RYAN BEMBRIDGE

Source: Property Wire

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More than £1.1bn in coronavirus loans given to 6,000 UK businesses

Over £1.1 billion has been handed to UK businesses through the Coronavirus Business Interruption Loan Scheme (CBILS), according to new figures.

However, less than a quarter of firms which have formally applied for the loans have secured cash support.

UK Finance said lending through the scheme has grown by £700 million over the past week, an increase of around 150%.

It said 6,020 loans have now been provided to businesses through the programme.

The pace of loan approvals has increased in recent days, rising from 240 loans on April 2 to 910 on April 8, with a further 1,800 loans worth over £300 million recorded over the bank holiday weekend.

It comes after calls from business groups, such as the British Chamber of Commerce (BCC), for the loan scheme to be accelerated to ensure small and medium-sized businesses can stay afloat.

UK Finance said lenders have received 28,460 formal applications from businesses, meaning that fewer than one in four applications have currently been approved.

However, it is understood that around 300,000 businesses have made inquiries regarding the loan scheme.

Shadow business secretary Ed Miliband said that the scheme “is simply not working well enough” after the figures were revealed.

He added: “We need change now. The Chancellor must move to a 100% guarantee of loans for smaller businesses as other countries have done.

“In this economic emergency, it is the right thing to do.

“Ministers must also accelerate the approval of new financial providers, do more to simplify the application process and provide support for good, future growth businesses not currently in profit. ”

UK Finance stressed that other applications are still being processed and are “expected to be approved over the coming days”.

Lower staffing levels at banks and other lenders mean they have come under significant pressure from increased demand for support from business customers.

Stephen Jones, chief executive of UK Finance, said: “Frontline staff in local branches and call centres are working incredibly hard to help firms access finance as quickly as possible amid unprecedented demand.

“Like all businesses they are working at reduced capacity as many staff are self-isolating or looking after family.”

Chancellor of the Exchequer Rishi Sunak said: “Getting finance to businesses is a key part of our plan to support jobs and the economy during this crisis – and we’re working with lenders to ensure support reaches those in need as soon as physically possible.

“Loan approvals have doubled in a week with more than 6,000 businesses benefiting from over £1.1 billion of loans – and it’s vital we continue this upward trajectory.”

Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said: “This improvement marks a starting point, but while one in five formal CBILS applications are approved, the major banks claim their approval rates for standard commercial loans are many times higher than that.

“These loans are state-backed, so approvals should be higher still. There’s still a lot of work to do.

“Many members tell us it’s difficult to get to the formal application stage – banks are still slow to respond to CBILS enquiries.”

Source: Express & Star

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Coronavirus business loans hit £450m but doubts about scheme remain

UK banks have now lent £453m through the government’s coronavirus business loans scheme as it picks up following an overhaul, although a large number of firms are still struggling to access the cash they need.

The Treasury said today that more than 2,500 loans for business had been approved as of yesterday via the coronavirus business interruption loan scheme (CBILS). This was up from Monday’s 2,022 figure that was revealed yesterday by City A.M.

It also announced that industry body UK Finance will start to publish regular updates on the scheme from next Wednesday.

Yesterday’s CBILS figures mark a significant increase from last Wednesday’s, when only £90.5m had been lent out to 983 businesses.

Yet the number of loans handed out is still only a small proportion of the number of enquiries companies have made about the scheme, which range in the hundreds of thousands.

Those requests are coming from some of the almost 6m small and medium-sized firms in the UK. They have monthly payroll costs of roughly £41bn, according to economic consultancy Fideres.

The CBILS programme offers loans via banks to small businesses with turnover of up to £45m. It was launched as part of the government’s £330bn coronavirus lending pledge.

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Business owners criticised the stringent terms, however, leading chancellor Rishi Sunak to overhaul the scheme last Thursday. In particular, he got rid of the rule that said firms must have exhausted commercial options first.

The Treasury today said the revamp is working as intended. “We’re working with the banks to get this support out. We’re making good progress,” a Treasury spokesperson said.

Loans still too slow for many

Yet many firms report that the service is still not working properly. Some have said they have requested assistance but have not heard back from banks.

Adam Leon, managing director of recruitment firm Orlik Leon in Bath, said the slow pace of the CBILS application process meant he had to take out an overdraft from his bank Barclays to tide him over until he received his loan.

“When I approached the bank I was told the process would take two-to-three weeks,” he told City A.M.

“Today I was told I will be lucky if I get it in four-to-five weeks. As a result the bank has offered me an overdraft which I had to sign a personal guarantee for to get through the eight-week period.”

Leigh Bryant, the director of motorhome repair company LNB Towbars in Bristol told City A.M. he had applied online for CBILS through Natwest, Barclays and Hitachi Capital. But he said he was yet to hear back from any of them.

“There must be millions of small businesses like me that are so dependent on that money because we don’t have the cash flow to carry on for months at a time with nothing coming in,” he said.

Mike Cherry, national chair of the Federation of Small Businesses, said: “We’re hearing reports that – despite these being ’emergency’ loans – the application process for securing them is still very demanding. Of course lending can only be made to viable businesses, but banks need to understand that time is of the essence.”

Banking industry body UK Finance, which compiles the figures, said lenders are “working hard to provide loans to all viable businesses who need it as quickly as possible”.

A spokesperson said banks are committed to helping the country “through this difficult period”.

By Harry Robertson

Source: City AM

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Government loans only appeal to half of business owners

  • Loans: Only half of businesses likely to take up government subsidised business loans
  • Cash: Two-thirds of businesses have less than £50k cash and are likely to run out of money before Easter
  • Revenues: 80% report falling revenues between 40-50% in March
  • Time: 45% of owners believe it will take at least a year, if not two, for the business environment to normalise
  • Crisis: 63% liken coronavirus pandemic to the global financial crisis in 2008

Business finance lender MarketFinance sought the views of business owners following the wide ranging measures announced by the Treasury recently. Despite the sizeable fiscal stimulus, more than two thirds (67%) believe funds will not reach them in time and they will run out of cash before Easter (12thApril).

Loans

Only half (52%) of UK businesses are considering taking advantage of the Coronavirus Business Interruption Loan Scheme (CBILS which offers up to £5m, interest free for the first year, over 6 years) to shore up their businesses. Because most businesses (67%) have a pre-existing loan, their biggest concern (36%) is making repayments for any additional loan. Invoice finance (borrowing against invoices on completed work) ranked highest as an alternative to taking a loan, with 48% considering this option over the next 12 months, to avoid the addition debt burden.

Cash flow

With revenue at companies across the country being hit hard, 80% reported a decrease this month of between 40-50%. They are seeking immediate measures to ease this pressure on cash flow. 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.

Anil Stocker, CEO at MarketFinance, commented: “Business owners are uncertain on revenue numbers for this year with a third expecting at least a 50% drop in sales and, rightly, weary 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 essence. It is imperative that businesses are made aware on how to access the measures they have announced but also to widen the range of finance options available to them”.

Advice

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.

Accountant Rashesh Joshi at Alexander Rosse commented: “The government headlines from last week covered numerous initiatives to be implemented such as the CBILS scheme, the job retention scheme and a new lending scheme facility for larger firms amongst a raft of other measures. The reality on the ground is unfortunately unlike the rapid spread of the COVID-19 virus.

“We have been touch with a number of the accredited lenders and our colleagues at larger accounting practices. Feedback, information and practicalities of the application process and lending criteria are decisively in slow motion. It seems large institutions with all their resources had no contingency plans in place. We are aware of challenger banks and other businesses who could act quicker but have been frustratingly left out of the original process (but now invited) thereby losing further critical time as highlighted in MarketFinance’s research.”

Rashesh added: We are partnering with our clients to help with their cashflow forecasts, rationale for the loan application, contingency plans, how they would cope with self-isolating staff and a whole raft of questions that the banks will ask before they will even consider lending. We are encouraging lenders to get with the reality on the ground which is frankly brutal. In our view the process needs to be simpler and quicker and bridging finance also made available to small to medium businesses”

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. It is critical that business owners have a prepared mindset for all scenarios. They will be heavily reliant on all their advisers – accountants, bankers and boards – to help them navigate the turbulence ahead.”

“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. It’s imperative they are up to speed with all the necessary information and nuances of what is available”.

Since 2011, MarketFinance has advanced over £2.9 billion to companies across a range of sizes and sectors, providing working capital and finance for everything from paying staff and suppliers to launching new products or services and accelerating growth.

MarketFinance is backed by Barclays, Santander InnoVentures, European venture capital fund Northzone (invested in Klarna, iZettle and Trustpilot), private equity group MCI Capital (also invested in iZettle, Azimo and Gett) and Viola Credit.

Source: Business Mole

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What the Budget means for SMEs – all the reaction

Chancellor Rishi Sunak has announced the government’s coronavirus response which includes the promise of emergency aid worth £1bn backed by a “co-ordinated, coherent and comprehensive three point plan” with business at its heart.

He says the response is “temporary, timely and targeted” and has been drawn up with the help of the Bank of England which cut its rates by 0.5 points this morning.

Key measures announced include: For SMEs with fewer than 250 employees, the cost of providing Statutory Sick Pay to any employee off work with coronavirus will – for the first 14 days – be refunded by the government. This will be worth more than £2bn for up to two million businesses, the Chancellor says.

MEASURES INCLUDE BUSINESS LOANS, SUPPORT ON SICK PAY AND THE ABOLITION OF BUSINESS RATES

Businesses are to get a new ‘interruption loan’ scheme guaranteed by the government Banks will offer loans of up to £1.2m to support SMEs. The government will guarantee up to 80 per cent of losses with no fees. This, he says, will be worth up to £1bn in “attractive working capital loans”.

He will also abolish business rates altogether for this year for retailers, in a tax cut worth more than £1bn. Any company eligible for small business rates relief will be allowed a £3,000 cash grant – a £2bn injection for 700,000 small businesses.

The Bank of England slashed the base interest rate from 0.75% to 0.25% this morning to shore up the economy hours after Health Minister Nadine Dorries was diagnosed with COVID-19.

Sunak told ministers at a meeting this morning coronavirus was “front and centre” and the Budget would “make the UK one of the best placed economies in the world to manage the potential impact”.

HMRC’s Time To Pay service will also be scaled up.

He said that Entrepreneurs’ Relief will be retained, but the lifetime allowance will be reduced from £10 million to £1 million, one announcement that brought immediate criticism.

Jamie Morrison, head of private client at accountancy firm HW Fisher said: “This change is as good as abolishing it completely and this is a huge mistake. While a sensible change following proper consultation would be welcomed, this is a step too far.

SHOULD THE CORONAVIRUS OUTBREAK WORSEN, JUST HOW MUCH ASSISTANCE CAN THE GOVERNMENT REALISTICALLY PROVIDE TO HELP BUSINESSES AND THEIR EMPLOYEES?”

“By cutting the relief entrepreneurs will only be able to benefit up to £100k during their lifetime.

“This is not enough to drive support of creativity and entrepreneurship. Businesses need consistency and this budget needs to look beyond the immediate implications of coronavirus to provide a vision beyond the next 12 months.”

John Ellmore, Director of Know Your Money said moves to support the self-employed offers some assurance to those that make up the ‘gig economy’ and support to help businesses implement self-isolation measures was welcoming.

He added: “That said, we are still left wondering as to what the long-term solution will be. Should the Coronavirus outbreak worsen, just how much assistance can the Government realistically provide to help businesses and their employees?”

“Let’s not forget the financial challenges that self-isolation can also pose to workers. It is estimated there are 2,000,000 people in the UK with no sick pay who may not be able to afford two-weeks of self-isolation.”

Andrew Mawson, founder of Advanced Workplace Associates makes the point that having the odd ‘work from home’ day is one thing, but managing large numbers of people working at home for a prolonged period of time is quite another.

“There is a lot we take for granted when we’re in the office. When we’re working away, we need to consciously develop new leadership and workership practices,” he said.

“Businesses should adapt and grow or they will diminish. Whether the required change is driven by global economics, workplace cultural changes, or imminent global pandemics such as coronavirus, businesses are having to change their ways of working. Sometimes in an instant.

BUSINESSES SHOULD ADAPT AND GROW OR THEY WILL DIMINISH. WHETHER THE REQUIRED CHANGE IS DRIVEN BY GLOBAL ECONOMICS, WORKPLACE CULTURAL CHANGES, OR IMMINENT GLOBAL PANDEMICS

“There are all sorts of reasons why people can’t get to the office. The trick is to recognise that home or remote working isn’t necessarily a bad thing.”

Mike Hampson, CEO, of Bishopsgate Financial said: “Have to hand it to Sunak, from business rates to investment in infrastructure to contingency funds for employees and SMEs amid Coronavirus Crisis delivering his first budget its sensible stuff by the chancellor.

“Increasing investment in R&D to a record £22bn a year, which is the fastest, and the largest increase in R&D ever higher than the US, China, France and Japan. In addition, significant investments in transport and technology infrastructure should provide an economic boost. Good news about Coronavirus loan scheme. Great support for #SME. However, will it be easy to access for SMEs to access these promised funds? As an SME getting loans could be painful, long and challenging.

“It’ll be interesting to see where the money is coming from when the details are published. This budget together with the earlier BoE interest rate cuts should combine to create a positive mood for the country in a time of uncertainty.”

Peter Webb, MD of Electronic Temperature Instruments, the UK’s largest digital thermometer manufacturer, said he welcomes the SSP announcement.

“These are unprecedented times and businesses of all sizes needed reassurance and a dose of confidence in order to stabilise their business and support their workforces,” he said. “What this does is it confirms the governments’ commitment to getting behind British business throughout this crisis and helps stabilise employment and supports productivity.”

Source: SME Web

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UK small businesses gloomy about coronavirus and Brexit

Worries over the impact of Brexit and coronavirus mean more than 70 per cent of the UK’s small and medium-sized businesses do not expect the country’s economy to grow during the rest of 2020, according to new survey data.

The pessimism about growth means firms 57 per cent of firms are unlikely to invest in growing their business in the next quarter, according to the small business confidence index, which was launched today by business banking platform Tide.

The UK economy has picked up in 2020 after the December General Election and the “phase one” US-China trade deal both provided some certainty to firms.

However, Britain faces the difficult task of striking a comprehensive free-trade agreement with the European Union by the end of the year, and is currently reckoning with the spread of coronavirus.

Both of these factors have led to pessimism among the UK’s smaller businesses, according to the Tide survey, which was carried out by Yougov at the end of February.

Coronavirus, which has now infected more than 270 people in the UK, is currently a major concern for businesses. More than half are concerned their business income will fall over the next quarter, while 57 per cent are unlikely to be above to invest in growing their business in the coming months.

The survey data came just days before chancellor Rishi Sunak is set to unveil his Budget on Wednesday.

The government had hoped it would focus on its agenda to “level up” spending – particularly on infrastructure – around the country, but it is now likely to focus on measures to deal with coronavirus.

Tide chief executive Oliver Prill said the government must “invest in our entrepreneurs and SMEs [small and medium-sized entrepreneurs]” and said he “hopes to see this reflected in the Budget announcement”.

By Harry Robertson

Source: City AM

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Post-Brexit investment in UK SMEs is vital to ‘level-up’ the regions and increase productivity

Community Development Finance Institutions are committed to investing in the regions of the UK and are key to the Government’s strategy to increase productivity and level-up communities post-Brexit, says Responsible Finance.

The EU’s European Regional Development Fund has been critical to the effective regeneration of regions across the UK. Its coherence and longevity have been key to its success. EU funding and instruments have been instrumental for CDFIs in enabling them to grow their SME lending and increase their offering of advice and support services to entrepreneurs.

Community Development Finance Institutions (CDFIs) are non-profit social enterprises which provide affordable finance to customers not supported by other lenders. They serve three markets: start-ups, small and medium sized enterprises; social enterprises and charities; and financially excluded individuals. They are currently the only entities solely focused on investing in disadvantaged communities through loans to enterprises unable to access finance from mainstream sources. They foster inclusive economic growth; they create good jobs, build businesses and revitalise communities. In 2019, CDFIs lent £171 million to 4,600 businesses and social enterprises. 94% of loans were made outside London and the South East, and businesses lent to reported an average increase in turnover of £320,000.

With over twenty years of experience and success lending in deprived communities, including delivering good value for money on government programmes such as the Regional Growth Fund, CDFIs offer the Government an ‘oven-ready’ tried-and-tested vehicle for revitalising the UKs most deprived communities. By partnering with and investing into CDFIs, the Government will catalyse a complementary reaction by the private sector; CDFIs are experienced in leveraging in capital from UK banks to match Government funding programmes and utilising the Community Investment Tax Relief.

The UK has a landscape of deep-rooted inequality built up over many decades, and is now one of the most regionally unbalanced countries in the industrialised world. Because of the regional and local differences in prosperity, we are not harnessing the economic potential that lies in the regions. If no action is taken the gap is expected to grow with 50% of future job growth going to London and the South-East.

Despite relatively low unemployment figures since the aftermath of the recession in Britain’s older industrial towns, when economic trends are looked at closely this drop in unemployment can largely be attributed to the rise in out-commuting jobs in other places and a local population with an excess of retirements over young entrants to the workforce. It is questionable as to whether employment growth in this way is sustainable or beneficial, particularly given the negative environmental implications of increasing dependence on the UK’s road and rail networks.

Rewarding employment opportunities should be available in towns and cities up and down the UK, as a city-centric model of growth does not necessarily work for every region. One way of creating more and better jobs is to increase investment in SMEs.

Small and medium sized businesses account for 99.9% of all private sector businesses and 60% of all private sector employment; they are the engines of the UK economy. The Government has a leading role to play in addressing regional disparities for businesses by ensuring more small businesses can access appropriate, affordable finance when they need it.

Regional imbalances in business finance hampers the ability of businesses to grow, recruit and innovate. In the UK, access to finance at the local level varies considerably, and the British Business Bank’s ‘Benefits of Diverse Smaller Business Finance Markets’ report showed that for seemingly identical companies, where they are based significantly impacts the type of finance and finance providers they can access. For debt financing, bank lending volumes broadly match the regional distribution of the small business population, however local level data shows considerable variation in lending.

Businesses often struggle to access finance from mainstream banks if they are deemed high-risk due to a lack of trading history or insufficient assets for security. The latest SME Finance Monitor found that the success rate for bank loans in the UK has continued to decline and is now at just 63%. Among those declined, a third were not able to expand as they had planned, and a similar proportion found running their business more difficult.

Banks are generally cautious when it comes to small business lending. SME loan applicants may be more likely to be unsuccessful in seeking mainstream finance if: it is a new business venture; they are first time borrowers; they have unique and unproven business plans; their application is presented poorly; or if they have a difficult credit history. The estimated debt funding gap is £1.4 billion. Whilst this number is not high by international standards, it still means missed economic and social benefits for the UK.

CDFIs adopt a flexible approach to determining the viability of a business, and can often provide support when mainstream lenders can’t. 93% of the viable businesses CDFIs lent to in 2019 had been previously turned down by a mainstream bank.

Business investment is also a key driver of productivity, and the decline of investment as proportion of domestic output in the past three decades has had an impact on the UK’s low productivity. The SME finance monitor shows that permanent non-borrowers are less likely to export than those that use external finance, and are less likely to grow, innovate, and make a profit. This contributes to the productivity challenge as businesses are unable to invest in the new equipment and technology which drives up their performance. This ultimately has an impact on the strength and resilience of local economies and the economic opportunities for their residents. Improving productivity is vital for increasing economic growth and raising living standards.

CDFIs are committed to investing in the regions of the UK and are key to the Government’s strategy to increase productivity and level-up communities post-Brexit.

Source: Politics Home

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Merchant Cash Advance 101 – Everything UK SMEs Need To Know About Business Cash Advance #1 – Alternative Sources of funding for SMEs

Running a business, of any size and nature, eventually boils down to how well you can handle the numbers. There are, of course, the important calculations about growth and reinvestment, but, as far as the day to day operations are concerned, it’s all about managing the cashflow.

Larger businesses have it slightly easier in this regard. Bigger pockets usually ensure better credit, thereby also implying that such businesses rarely have to borrow in order to look after everyday expenses.

The same, however, cannot be said about an SME. SMEs have a whole different set of questions to answer, and the answer usually lies in how easily, how conveniently, how fast and how affordably they can borrow money. This is where alternative sources of finance come to the fore as many of them have the ability to mould themselves to the exact needs of your business.

Merchant cash advance is among the most popular alternative funding sources for UK SMEs, and we will try to take stock of its features in this article.

What Is Merchant Cash Advance?

Merchant cash advance, also known as business cash advance in many circles, is a fast, unsecured business loan that helps SMEs tackle the cashflow problems. Merchant cash advance is a cash injection that is tied to your future debit and credit card sales. In that sense, merchant cash advance or business cash advance is a good source of alternative funding for B2C SMEs.

Merchant Cash Advance Definition

Merchant cash advance is an unsecured business loan that is repaid through the future debit and credit card sales you make.

Unlike other business loans and overdrafts, there are no fixed monthly repayments to make. There is no APR to worry about either. The equation is fairly simple – the more sales you make, the faster your loan gets repaid. This also means that if you’re experiencing a particularly slow month, your repayments will be proportionately smaller.

Each merchant cash advance account is tied directly to your card terminal (point of sale). So, it’s important that a healthy share of your sales comes through debit/credit card transactions.

Merchant Cash Advance – How It Works

Merchant cash advance is inherently different from other unsecured business loans in that it is based directly on the profitability of your business. Lenders, while assessing the potential of your business, will take a close look at the performance of your business – especially the card terminal transactions. Due to this peculiarity, it becomes important to understand how merchant cash advance really works.

The Process – Take A Moment To Familiarise Yourself With How MCA Works

Merchant cash advance lets you borrow money as and when you need it – but it’s technically not really a loan (we will get down to that part shortly). For now, we suggest you take a moment to understand the process and how it will impact your cashflow.

  1. Any SME that makes card terminal sales can apply for a merchant cash advance. Commercial Finance Network makes this process incredibly easier and faster.
  2. The lenders take a look at the recent history of card based transactions and decide your affordability. This is similar to other forms of credit and loans.
  3. Once the lender determines your affordability, you’re presented with a cash advance offer.
  4. After you accept the quote, the money is transferred directly to your bank account. This process is smooth and involves minimal paperwork. Working with an experienced whole of market broker like Commercial Finance Networks means that you will have the added advantage of speed. You can expect to see the funds in your account in 1-2 business days.
  5. You will start paying the money back to the lender as soon as the repayment period kicks in. The repayments are usually based on your daily business (5-25% of your daily card sales, depending on the offer you’ve agreed to).
  6. There is no conventional interest rate or APR. You’ll essentially be selling a fixed percentage of your future sales to the lender until the advance is fully repaid along with the fees and charges. An upfront interest amount is calculated using the “factor rate”.

Merchant Cash Advance Factor Rate – What It Is & How It Is Calculated

Every MCA quote you will receive will specify a certain “factor rate”. This number essentially replaces the traditional interest rate and tells you everything you need to know about the cost of borrowing.

The factor rate is expressed as a single number that typically ranges between 1.1 and 1.5 (depending on the health of your business and your affordability). For example, if you’re borrowing £10,000 from a lender and the factor rate is 1.1, you will be required to repay £11,000 in total. It’s really as simple as that.

There are a few things to consider here.

The factor rate differs from the APR/interest rate on two counts. Firstly, it is a fixed number that tells you exactly how much you will need to pay. Secondly, it has nothing to do with the balance of the advance that’s unpaid. It doesn’t matter how quickly you pay the MCA off, you will still pay the amount determined by the factor rate.

Merchant Cash Advance Is Not Really A Loan

In the traditional sense of the word, a loan is the amount you borrow and pay back as a function of the interest rate and time. Therefore, it should be easy to see why it’s not a good idea to treat a merchant cash advance as a loan.

As we mentioned earlier, when you borrow money using an MCA, you essentially agree to sell a part of your future revenue to the lender. The lender assumes much less risk here, even though it’s an unsecured mode of credit. We would go so far as to argue that a business cash advance/merchant cash advance is an unsecured counterpart of revenue based alternative sources of funding for SMEs (for example, invoice finance).

How Much Can You Borrow?

Larger businesses usually don’t feel the need to borrow via MCA since they have at their disposal stronger lines of credit from banks and other lenders. SMEs, on the other hand, can borrow enough to tie up the loose ends, get the cashflow in order and access money to fund purchase orders/new business opportunities.

At Commercial Finance Network, we help UK SMEs borrow anywhere between £2,000 and £200,000 as a cash advance from our panel of responsible and specialist lenders.

Please note that the amount you can borrow will depend upon the following factors:

  • The nature of your business and the industry/sector you operate in
  • The average daily turnover (card terminal transactions)
  • The overall profitability of your business

There’s no need to feel overwhelmed by these factors – these are essentially the same factors that lenders will look at while assessing any other loan application.

Please read on to learn more about how we, at Commercial Finance Network, make it easy for you to apply for and get a merchant cash advance from UK-wide lenders.

Merchant Cash Advance – A Short Case Study

Being a leading whole of market commercial finance broker, we get to work with businesses of all sizes. This gives us a unique vantage point regarding the requirements of UK SMEs. The following MCA case study will help our customers and readers understand the practical importance of merchant cash advance as a financing tool.

We recently worked with a London based mobile food startup. Their business model was interesting and had already received a good deal of positive PR in local circles. However, at less than 18 months of age, the business had no history of credit to fall back on, meaning that they couldn’t borrow the money required to grow their business from banks and high street lenders. To receive more funding from investors they already had on board, they had to hit a monthly sales target – a target they couldn’t possibly reach without investing in a new point of sale (a financing catch 22 situation). This meant that they needed at least £20,000 to buy a new van and hire 2 more employees.

After understanding their unique situation, we forwarded their application to a specialist MCA lender who agreed to assess their business.

The following terms were drawn:

  • Cash advance: £20,000
  • Factor rate: 1.20
  • Total amount to be repaid: £24,000
  • Average card sales forecast (per month): £9,000
  • Average card sales forecast (per day): £300
  • Percentage of daily card sales to be paid back: 33% (£100)
  • MCA repaid in around: 240 days (8 months)

As the borrowing business received the money in just about a couple of days, they were able to invest it back readily. This opened up an additional revenue stream for them, and as they reached the targets laid down by the investors, they were also able to access a new line of credit.

Merchant Cash Advance – Who Is It Suited For?

Merchant cash advance is suited for SMEs that:

  • Require money urgently
  • Register significant card sales on a daily basis
  • Operate in cash rich industries and sectors

Are You Eligible For A Merchant Loan (Merchant Cash Advance)?

You’re eligible for a merchant loan if:

  • You’re a UK based business that accepts card payments,
  • You have a merchant account,
  • You generate at least £2,000 in card sales each month (over a minimum of three months),
  • You are a registered business (sole trader, partnership or limited company)

Advantages Of Business Cash Advance (MCA)

Now that we’ve seen how MCA works, let’s now see what advantages it has to offer to the borrower.

1. It’s Fast

The most important advantage is the speed. When you work with an experienced broker and specialist lenders, you can expect the entire process to complete within a matter of hours. This not only saves you a great deal of hassle, it also lets you put the money towards the requirements as soon as possible.

2. It’s Flexible

Since there is no interest rate to worry about, you know how much you’re going to have to pay back. This makes merchant cash advance incredibly flexible. On a good day, you will pay more and on a slower day, you’ll pay that much less. In other words, you will never be put in a position where you have to stretch your finances thin just to make the repayment.

3. No Need To Draw From Your Cash Transactions

You will only pay back a part of your card sales. You will still have full control over all the cash sales you make during this period.

4. No Collateral/Security Required

MCA is an unsecured form of credit. You will not be required to raise a deposit or collateral to get approved.

5. Poor/No Credit Shouldn’t Be A Problem

Most lenders tend to approve merchant cash advance applications from SMEs that have poor/no history of credit as long as the business performance is promising.

6. MCA Works With All Major Card Terminals

All major card terminals and machines are compatible with the auto debit facility for card sales.

7. MCA Can Be Topped Up

Some lenders provide the option of topping up your existing MCA account based on your history of repayment and business performance. This allows you to borrow more as and when required.

Relative Shortcomings Of Business Cash Advance (MCA)

  • Merchant cash advance is not at all suitable for businesses that do not accept card payments.
  • Young businesses that have little to no history of card sales find it difficult to get approved.
  • While MCA helps you gain access to funds faster, it also means that your daily cash flow will be impacted as long as the advance isn’t fully paid back.

How To Apply For A Merchant Cash Advance?

Merchant cash advance is a specialty form of financing. As is the case with all such finance products, it’s always a good idea to work with specialist lenders. Generic high street lenders don’t have the expertise or experience required to make such deals work, and the borrower has to face the brunt in the form of an unreasonably expensive offer.

At Commercial Finance Network, we help you get fast, flexible and low factor rate MCA offers from some of the most experienced and trusted specialist lenders across the UK.

Applying is easy – just fill in this form to message us or call us on 03303 112 646 to speak to a merchant cash advance specialist.

A Merchant Loan Can Be Used The Way You Want To

Unlike a mortgage or asset finance, merchant cash advance can be used to fund any and every business requirement as you see fit. Common examples include:

  • Opening up a new location
  • Managing the daily cashflow
  • Staff salaries
  • Funding new purchase orders
  • Refurbishments
  • Advertising and marketing
  • Purchasing new equipment
  • Investing
  • Paying off other loans

Make Merchant Cash Advance Work For Your Business

Given the number of positives it brings on board, merchant cash advance is undoubtedly one of the most versatile financing tools an SME can rely on.. To know more about how an MCA can help you grow your business and take care of emergency requirements, call us on 03303 112 646. You can also apply for a merchant cash advance directly by filling in this online form.