COVID-19 pandemic is taking its toll on both the lives and livelihoods of the UK nation. For businesses, the challenge of regaining the monetary losses suffered in recent months commences. This is particularly true for SMEs.
Small to medium-size businesses account for 50 per cent of total revenue that is generated by businesses in the UK. But one concern on every business owner’s mind is how their finances can be supported during this current climate.
With this in mind, we discuss a variety of different ways that SMEs can support their finance department during these difficult to predict times.
Consider the government-backed loans available
As of 17th March, the chancellor made a pledge to all businesses that government-backed loans will be available to SMEs through the British Business Park. Offering loans that support up to £5 million in value, this is one of the lifelines that SMEs should look into. It could help prevent negative cash flow results, or worse, forced business closure.
The overall purpose of this scheme is to provide access for SMEs to loans or overdrafts when necessary. The government will give lenders 80 per cent for each loan that SMEs seek in order to support everyone through these difficult times. Perhaps one of the main benefits to consider of this temporary scheme is that no interest has to be paid within the first six months of taking the loan out. Plus, no charges will be given to both businesses or banks for this loan scheme.
Make some cost cuts
Supporting your business financially is not just about finding new sources of money, but about how to save it too. Finding effective ways to reduce your business costs could help offer some financial relief.
Some effective ways to cut your costs could include:
- Assess your current portfolio of products and services — Depending on the nature of your business, some products and services may be performing better than others. For the ones that are only accounting for small cash inflows, consider putting your suppliers on hold for now to reduce costs.
- Encourage workers to continue working from home — Not only will this help decrease the chance of coronavirus spreading between the workforce, but it will also help reduce the cost of utilities including water and electricity bills that offices and workspaces require.
- Search the market for cheaper suppliers — For SMEs that are product-orientated, compare the price you’re currently paying for suppliers and search around for cheaper substitutes.
- Reduce heavy advertisement costs — Since now the power of social media is arguably the most effective marketing tool to use, TV and radio advertisements may be an unnecessary expense for now. Instead, focus on creating a business presence online, using the likes of Facebook, Twitter, and LinkedIn to do so – all of which are free tools.
- Conduct an audit — To make sure that all your accounting books, taxes, and cash flows are accurate and up to date, conducting a small business audit will help improve your chances of finding a lender if you require further financial support.
Make use of the furlough scheme
The chancellor announced the coronavirus job retention scheme, commonly referred to as the furlough scheme, has been extended until the end of April 2021. Despite initially only lasting till May, this extension will help support not only SMEs, but the employers working within them too. The government has pledged to cover 80 per cent of all wages up to a maximum £2,500 per month.
With more than 9 million employees furloughed over lockdown, it's clear that this scheme is still highly valuable for SMEs. With this in mind, if you are an SME struggling to cover overhead costs as the pandemic continues, make use of the furlough scheme to help support both your business and staff.
Keep up to date
Since the coronavirus pandemic took the world by storm, every day is a learning curve for both the nation and government. With this said, keep up to date with all the latest policies and schemes that are being introduced to help support your SME in every way possible.
Of course, many determinants can affect how beneficial these methods are when it comes to supporting SMEs. However, no business should feel helpless. Finding financial support and relief throughout this time all depends on knowing the right place to look.