Only half of businesses are likely to take up government subsidised business loans that were introduced in response to the coronavirus outbreak, according to research from business finance lender MarketFinance.
Just 52% of UK businesses are considering taking advantage of the Coronavirus Business Interruption Loan Scheme, which offers up to £5m interest free for the first year.
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.
Additionally, because most businesses (67%) have a pre-existing loan, their biggest concern is making repayments for any additional loan. Invoice finance 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.
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 of MarketFinance said, “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.
“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.”