Whenever we sit down to write this blog, the desire to avoid writing about the obvious is strong. The reality is, as much as we want to pretend it’s business as usual, it isn’t. We need to be having conversations about how this pandemic is affecting us all in our daily lives so we can mitigate the impact.

Winter is coming

The iconic House of Stark motto can be applied both literally and figuratively to remind us of the importance of being prepared. Not only are many businesses still recovering from the impact of the pandemic, there’s the very real threat of a second wave.

Sage released a recent report entitled “Survival, Resilience and Growth: Placing small businesses at the heart of the UK’s economic recovery”. The report reflects our ethos that SMEs are the economic backbone of this country and we must do all that can be done to support them.

Small businesses need financial support

The report revealed that 86% of small businesses believe a second wave of COVID-19 (with social and economic restrictions similar to the first) would result in a negative impact on their business. 39% say it would be a severe impact, and 15% believe their business wouldn’t survive a second wave. 39% of respondents aren’t certain that they will return to profitability by December even without a second wave, and many have been reliant on government handouts to keep afloat.

As we would expect from the ever-resilient cohort of UK small business owners, there’s some positivity to come out of the report. 40% of SMEs feel they are building stronger relationships with their customers and suppliers as a result of pulling together to get through tough times. New habits like remote working have meant that 36% recognise that saving money is as good as making money. Many businesses are finding new ways to become more cost-effective – a valuable realisation that will pay dividends long after this crisis has passed.

Digitisation is opening doors

One other valuable realisation that businesses have reached is that investment in digitisation will create opportunities for cost savings and innovation.

In many ways, the pandemic has represented a major evolutionary event, both in terms of our social and economic behaviours. The eventual demise of the High Street may have fast-forwarded another 5 years, but simultaneously the digital revolution has gathered momentum. As businesses have been forced to innovate and digitise to handle remote operations, it’s estimated that three years’ worth of digital adoption took place in 2 months from the beginning of the UK lockdown.

What lies ahead for small businesses?

As payments that were initially delayed fall due in early 2021, this means that many businesses who have also accumulated debt during the last 7 months will now begin playing catch up. It’s this predicament that, if coupled with a second wave, could prove tricky to overcome.

Rishi Sunak’s Winter Economy Plan, unveiled on 24th September, outlined the further steps the Government are taking to support the activities of small businesses.

So far, £38billion has been injected into small to medium businesses through the Bounce Back Loan scheme. Businesses will now be given more time to repay these loans through the Pay As You Grow scheme. This means loans can now be extended from 6 to 10 years, almost halving the monthly repayments. If a business is struggling they can choose to make interest-only payments and if they are in real jeopardy they can suspend all payments for up to 6 months.

The government assures us that no business will see their credit rating suffer as a result of seeking repayment relief through the Pay As You Grow scheme, and so these measures should go some way to alleviate the catch-up predicament we outlined above.

Extending support for SMEs

The chancellor also revealed that the government will be extending their guarantee on the Coronavirus Business Interruption Loans, paving the way for lenders to cut businesses some slack on repayment terms.

Additionally, the deadline for applying for a COVID-19 crisis loan has been extended to the end of the year. There is also a promise of a new loan programme to begin in January, the details of which won’t be revealed until later this year.

The chancellor will also be allowing businesses to spread their deferred VAT bill over 11 smaller interest-free repayments. Self-assessed taxpayers will also receive an extension of 12 months, though may incur some interest.

The VAT rate will remain at 5% for the hardest-hit hospitality and tourism sectors until 31st March 2021, and though the Job Retention scheme will end this month, the newly unveiled Job Support Scheme will further support SMEs in retaining staff in “viable positions”. This will force the hand of many employers, who may find that it is cheaper to keep on one full-time employee rather than 3 employers working a third of their hours, but it should quickly give us a real indication of the state of the labour market and end conjecture. It’s time to face up to what needs to be done to repair it.

SMEs are uncertain about the future, but have reason to be hopeful

There’s been a mixed reaction to the government’s proposed interventions, and amid growing threats of a second wave, there’s naturally a sentiment of uncertainty from many UK entrepreneurs. Providing we can avoid another full-scale national lockdown, many should be encouraged to remain optimistic.

Small business owners must be proactive and rely on diligent preparation to see them through the crises to come, not sit back and await rescue once the storm hits.

It’s time to batten down the hatches, get your digital ducks in a row, keep marketing and business development pipelines as active as possible, and maximise liquidity and cash flow now to give your business a fighting chance of surviving winter with COVID-19. Talk to us today about how our invoice finance solutions might help you.