Tuesday afternoon鈥檚 press conference saw Rishi Sunak announce new financial measures to bolster the UK economy, including further funding for small businesses, following on from the 拢12 billion support package committed during the Budget last week. The new measures include a 拢330 billion scope for loans for struggling firms, regardless of their size, and loans of up to 拢25,000 for businesses in the hospitality and retail sectors; the business rates holiday has also been extended to 12 months for firms in these sectors. Small businesses are also able to apply for loans of up to 拢5 million, with no interest due for the first six months.
Although the Government鈥檚 efforts to support small businesses though the Coronavirus鈥� duration are admirable and will undoubtedly go far to help, they are ultimately too short-term. Once this immediate relief is over, small firms will find themselves inundated with a build-up of debt.
Luke Davis,聽CEO of IW Capital- a private investment house which specialises in SMEs 鈥� calls for further grants for SMEs:
鈥淚n unprecedented times, the Government have announced unprecedented measures to combat the impact of COVID-19. The gargantuan amount of 拢330 billion to support UK businesses will go far, however the nature of this money 鈥� promised in the form of loans 鈥� is only enough in the immediate interim.
The six month interest rate聽break offered on these emergency loans is helpful, but after this time SMEs will find themselves swimming in debt.聽Many start-ups and scale-ups will be operating at a loss already, as is the nature of these types of businesses within their formative, foundation years, and many will also have a backlog of historical debt. Taking out a new loan now will provide temporary relief; however ultimately their debt will simply compound. The Government perhaps should have offered assistance by way of providing further cash grants rather than loans.
There are three stages to be addressed in this crisis:聽managing the聽effects of the immediate impact; the recovery phase and, eventually,聽the growth phase. Private investors can, and should, help small businesses聽through all of these stages.
Financially, this is a testing time, and small businesses are fragile to say the least. They聽stand to take the biggest blow following the epic impact of COVID-19聽and 鈥撀燼lthough聽this聽much-needed cash injection from Sunak will be of assistance 鈥撀燽eyond this period,聽the entire community of聽private UK investors will need to pull together beyond the period of immediate recovery.鈥�
