Coronavirus causing cash flow strains for 69% of SMEs

Over two-thirds of UK SMEs (69%) have reported significant pressures on their cash levels since the outbreak of Covid-19, according to research from business lender MarketFinance.

Related topics:  Commercial,  Commercial finance
Rozi Jones
11th March 2020
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"The impact of the coronavirus spread is being felt by SMEs across the UK as finance and supply chains are disrupted."

This is in large part down to businesses paying for supplies earlier than anticipated because of Coronavirus-related stockpiling and fears of deeper disruptions to transport (road, air and rail) linkages.

Additionally, payments are being delayed on orders and work that has been completed. Three-quarters (74%) of business owners reported invoices due to be settled at the end of February have not been paid yet and that these were unlikely to be settled before the end of March 2020.

Over a third (36%) of business owners fear they won’t survive to Easter (6 weeks) if they are unable to secure some finance to bolster their business. Meanwhile, as economic conditions worsen, and with the possibility of widespread quarantine implemented across parts of the country, businesses will need to have financial and operational contingency plans in place to protect jobs, industry and communities.

Anil Stocker, CEO at MarketFinance, said: “The impact of the coronavirus spread is being felt by SMEs across the UK as finance and supply chains are disrupted. At the best of times, only around half of these businesses are cash flow positive. Today, businesses are feeling a palpable sense of helplessness and isolation and there is a lack of specific information on how to cope with the crisis.”

“At the moment cash is king and if businesses are being starved of this cash, it will leave them stranded. Whilst policy efforts play out to contain the spread of coronavirus, business owners should brace themselves for some turbulence and have a prepared mindset for the scenarios ahead.

“Rishi Sunak has a golden opportunity to prove that he is a champion of UK SMEs. There is a role for Government to work with businesses, banks and other lenders to ensure a resilient economy. It will be the smallest businesses that are most hit as they have the least bargaining power in global supply chains. They could, for example, give businesses VAT/tax ‘holidays’ to ensure that they have enough money to cover immediate costs.”

Anneliese Parnes, CEO of SME firm Dynamite Promotions International, commented: “I’ve been in business for 28 years and have never seen anything like this. Production of our products has stalled in China and a number of my clients in the film, entertainment and food industries have pushed their launches and events back 6 months. China will get back up and running because they move fast there but it’s uncertain if, we in the western world, will be able to get back on track as quickly."

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