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Uncomfortably numb

Industry insight from David Grosse, managing director of Number Eight Business Finance

It is becoming increasingly difficult to write anything positive about our industry these days, but as much as I might struggle to remain optimistic, my preference is to move forward in as realistically optimistic a manner as possible.

I’d prefer not to use the C-word here, but as my remit is to comment on the world of business finance, it is impossible to ignore the impact that current virus-related events are still having on our daily personal and professional lives.

Before Christmas I predicted that the marketplace was “going to struggle with a commercial needle drop that will lay deep beneath the true economic carpet”. Fast forward to only a few weeks later, and I’d say that the economic carpet is now looking more encrusted than I first thought.

In simple terms, unless the government and lending fraternity pull their fingers out quickly, we must brace ourselves for problems that could last throughout 2021 and far beyond. So, what must be done? I have a few ideas.

Delay repayments

First of all, the commencement of Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme repayments needs to be pushed back a further 12 months. If business owners can make the repayments as of April onwards, then great. However, a further 12-month extension will help take us closer to some level of normality and give businesses more time to get back on their feet. Thereafter, business owners can work their way back to financial security and stability for the years ahead.

Based on all that I have witnessed since the first government loan programmes were introduced, I personally believe that the introduction of a higher limit for Bounce Back loans should come into effect immediately. Keep the 25% of turnover in place, just increase the limit to £100,000.

Make CBILS fit for purpose

The CBILS fiasco has been discussed and debated to death; however, with a little tweak here and there, I am confident that a broader offering, coupled with a strengthened collaboration between the British Business Bank and lenders, could enable many more viable businesses to gain access to finance.

The inconsistencies and stricter credit lender appetites need to be relaxed, but no lender will consider this unless more comfort can be taken from their existing CBILS terms agreed at the very start of the pandemic. Hopefully, they are already sat back round the table and making the necessary amendments.

Back in March 2020, no-one could have imagined that businesses would be facing up to 18 months of disruption – and many firms that may not have needed or considered government support in the past are certainly in need of it now. Access to a range of fit-for-purpose offerings must be made available – and fast.

Utilise intermediaries and advisors

To those who fear the current offerings are open to fraud, and that sensible lending practises must be retained regardless of government guarantees, I say this: As a nation, we boast a rich database of intermediaries and advisors. Let’s use them! The skill sets that many of us have acquired over the years will arguably supersede anything that a bank manager, accountant or politician can offer, in terms of a full understanding and comprehensive knowledge of what is a very diverse and complex marketplace. By following a traditional model, where people work with people, the process of gaining access to the best-fit finance will prevail, and the lenders want this too!

Give a lifeline to the forgotten millions

The latest figures estimate that more than 250,000 small businesses are likely to collapse this year alone, and there are about three million self-employed/sole directors who have been excluded from any form of government support.

I’m not for a moment suggesting that all businesses should qualify for support, but ultimately those that do pass the initial stress tests should be given the best chance of survival by making the best-fit finance options available.

All applications can be routed through an army of pre-qualified intermediaries that have been working on the frontline since the banks crashed over a decade ago. Ideally, funding would be provided through grants not debt, but anything is better than nothing at all!

When I started my small business, the advice from the accountant was that if your business makes no money, then you do not get paid. And that is still relevant today. The system should, therefore, compliment the basic rule of all micro and small businesses owners – that you will earn your living from a humble PAYE salary and a variable dividend can be drawn depending on the profit achieved.

So, what is it all about, Rishi? Why are millions still being treated like tax dodgers? When are they going to be recognised as genuine business professionals that have probably been managing unpredictable cashflows since inception, let alone as of today? How on earth are the forgotten going to survive?

The option of no further support, no extra loan scheme admendments, no limit increase for BBILS, no relaxing of CBILS credit appetites and no lender offering anything sensible unless secured is not worth thinking about. The huge cost to local communities and individual livelihoods continues to make me uncomfortably numb.

David Grosse, Managing Director,

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