Richard Bearman is the Managing Director of Start Up Loans, a government-backed programme that launched in 2012. It provides loans of up to £25k to new and early-stage businesses throughout the UK who might struggle to access finance elsewhere.
There has been much discussion of the challenges and opportunities for businesses that started in the midst of UK lockdowns. Most of us have read about or know someone who started a ‘side hustle’, enabled – or sometimes necessitated – by changes in lifestyle brought about by Covid-19. Many of us could probably think of at least one that has gone on to be a fully-fledged business. However, there are a whole host of enterprises formed pre-pandemic that had perhaps just got going when lockdowns hit that might still need some extra support to maximise their potential.
Faced with economic and operational headwinds, companies that successfully weather the storm tend to be those that shore up their defences in a way that suits their specific model. Large businesses typically have good reserves of liquidity and the ability to invest inwards or absorb rising costs compared to smaller companies. They often have more options to choose from, such as reducing dividends or planned investments, optimising supply chains, making redundancies, or cutting budgets for non-business critical departments.
The main challenges to smaller businesses are often liquidity, and access to funds that will give them the staying power to either absorb rising costs for a set period or invest in the areas they need to reduce costs and sustain growth. A recent SME Insights Report by Simply Business found the top challenges listed by UK smaller businesses in 2022 were rising costs (70%), tax and national insurance hikes (36%), marketing and the ability to find customers (26%), lack of funds or access to credit (22%) and recovering from pandemic related losses (18%) respectively.
Arguably, access to funds and credit is the most fundamental component in being able to manage the impact of some of these other challenges. There’s also no doubt that in most instances the younger a business is, the lower the reserves of funds it will have readily available.
Smaller businesses formed since 2019 have already weathered an extremely disruptive period while in a vulnerable, formative stage of their existence. The Simply Business report notes the average UK smaller business lost £20,981 during the pandemic. Consequently, many are now either in need of additional capital to bolster their balance sheets or ready to scale up now that they’re back on their feet. It’s imperative to the resilience of our economy that these businesses don’t get left behind.
This is the driving force behind the expansion of our Start Up Loans programme.
Up to now, we have provided loans and support to businesses that have been trading for up to two years, with £900m in funding supplied since 2012. With our recent expansion, those that have been trading for up to three years are now eligible for a first loan, and those trading for up to five years for a second loan. This will help even more smaller businesses to secure an additional injection of capital, including many that have come through the challenges of the last few years.
As well as access to capital, many businesses also benefit from understanding how fellow smaller businesses are navigating and adapting to the landscape. Valuable lessons can be learned from the success of others showcased in businesses publications, and it’s also vital that business owners find partners, networks and advisors with whom they can compare notes and experiences, or turn to for advice. It’s one of the reasons that Start Up Loans offers 12 months of mentoring and support from its Delivery Partners, who can provide help with business-related activities such as strategy, planning, marketing, supply chain management, HR and payroll.
It’s broadly accepted that the operating environment is causing a lot of stress to many smaller business owners, who are facing challenges that they wouldn’t ever have anticipated when they decided to found their enterprises. However, storms pass, waters settle and with the right tools and support businesses can come out the other side of economic turbulence better placed to recover and grow.
