Research released the Corporate Finance Network, an accountancy trade body, suggests nearly a fifth of all small and medium-sized businesses in the UK are unlikely to access the funds they need to survive over the next four weeks, and could collapse as a result.
If the organisation’s apocalyptic predictions come to pass, between 800,000 - one million firms across the country may close their doors in the next month, with almost four million people losing their jobs in the process.
“Small and medium-sized businesses employing less than 250 people employ most of the workforce - 23 million people. We could lose up to a million of them in the next month or so, and it will be irreversible which will be catastrophic for the UK economy,” Kirsty McGregor, Corporate Finance Network founder, told the BBC.
Read the latest blog from our Corporate and Commercial team on the Coronavirus Business Interruption Loan Scheme which aims to support SMEs in these uncertain times.— MLP Law (@MLP_LAW) April 1, 2020
For help and advice, please speak to our Corporate and Commercial team on 0161 926 9969https://t.co/RT74QwLB8C
McGregor went on to suggest the government needed to encourage small businesses to take over companies going bust in their local areas so employees could still be paid.
Chancellor Rishi Sunak said a fortnight ago “any good business in financial difficulty” would be able to literally walk into bank branches and discuss Coronavirus Business Interruption Loans (CBILs), which grant up to £5m to help firms survive the lockdown. However, thousands of troubled businesses allegedly cannot contact their banks by phone - and others have been told by they're not eligible for a loan in any event.
Firms can only access CBILs if they can't borrow in a normal commercial way, such as against the value of a property, and directors of businesses needing to borrow over £250,000 must sign personal guarantees, meaning if the firm defaults on the loan, a director’s personal property could be repossessed.
You will have seen that the Chancellor has announced that the British Business Bank will manage the Coronavirus Business Interruption Loan Scheme (CBILS)— BrackmillsBID (@BrackmillsBID) April 1, 2020
Read about the attractive terms for businesses here: https://t.co/JqhcjI1WqV
A spokesperson for bank trade body UK Finance said lenders were “working hard” to get financing to “all businesses who need it as quickly as possible”, including providing CBILS “where appropriate”.
“All lenders will take into account a business's individual circumstances when considering applications and many business loans can be provided either unsecured or secured on business assets,” they added.