Most small businesses think it will take more than a year to return to pre-Covid trading levels. What should they do to ensure their financial survival?
Small business owners believe we are likely to see a long, slow road to recovery ‘ with one in five estimating that it will take two years to get back to pre-pandemic levels.
Even among their more optimistic fellow entrepreneurs, more than half think it’s going to be a year before trade recovers to the point where they can feel they are back to normal.
It might be expected that small business owners are busily liaising with their accountants for advice and support to ensure they don’t run out of cash when they return to trading. They should also be exploring all the options to secure funding through government support and loans.
That’s certainly what we’d advise SMEs, as well as calling on government to make it as clear and easy as possible for small businesses who have struggled through the pandemic this far to navigate the next long stage to full economic recovery.
Our SME Tracker, with partner The Corporate Finance Network (CFN), asks accountants about how their clients are coping with business survival in these troubling times.
In addition to the concerns expressed about a drawn-out recovery phase, we also discovered that only 12% of SMEs were asking themselves how much cash they needed to survive the next year.
A large majority of 71% said they had been negatively affected by the global health crisis, but little more than half that proportion ‘ 38% – were making plans to take on extra debt to fund their return to trading and the rest of the months when business is expected to be down.
The government has launched new Recovery Loans this month to address this potential finance gap, but anecdotally we are hearing from our members that take-up in the early days is sluggish, as lenders are not yet ready to process applications.
We believe the British Business Bank has to be quicker to enable more lenders to offer affordable funding. As more entrepreneurs decide they need access to capital, it needs to be quickly available.
Small businesses have suffered a confidence hit in the year of lockdowns and restricted trading. Some company directors have been left out of government support and are now unwilling to take on extra debt.
We encourage SMEs to engage with planning their financial survival. They need to be aware of all the financial options open to them. This will help them to get back trading quicker, to be in the best position to take advantages of emerging opportunities and to build resilience into their enterprise.
They have already foreseen a long road ahead with further potential obstacles as the government tries to navigate a way out of the global health crisis and they should prepare themselves to withstand more bumps in the road.