The deadline for starting an application for a government-backed loan has been extended to January 31st 2021, but lender appetite is diminishing. What should you do and who do you turn to when you need working capital and the bank says no?

UK businesses have used government-backed loan schemes to survive these most gruelling of months. And with the latest lockdown adding to to the pain, the second wave will push those in perilous situations over the edge. If you’re one of the hundreds of thousands of business owners temporarily closed again you’re probably exploring your options.

Government-backed schemes have naturally been the first port of call for business owners. More than £50bn has been approved in Coronavirus Business Interruption Loans (CBILS) and Bounce Back Loans (BBLS), with more than 1.3 million struggling businesses utilising them. But banks are restricting access to them due to fears of fraud and future defaults and more likely to back the larger small businesses now. The National Audit Office has said that up to £26bn of £38bn BBLS loans may not be repaid. And then there is a backlog of applications to process, although with the latest extension that will ease.

So it’s not that you shouldn’t apply. In fact the opposite is true. CBILS is unique in that there are no fees or interest to repay in the first 12 months. In September £15bn on CBILS lending was approved across 70,000 businesses. And as the backlog for processing applications clears, the sooner you do so, the more likely you’ll get funds when you need them most. But you may need to look beyond your bank – alternative lenders such as Funding Circle and iwoca are still active. You don’t have to start repaying the loan for the first 12 months. You are 100% liable for the debt, however.

These schemes do have their limitations. With a cap of £50,000, BBLS are often not high enough to see business owners through a longer period of disruption. High street banks also limited CBILS applications to existing customers only. While it is possible to take out CBILS funding from multiple lenders, having existing credit – even when it’s government-backed – can be a negative factor in the bank’s decision. Ultimately it comes down to affordability and the bank’s discretion.

The need for working capital

Despite difficult trading conditions, we are still seeing plenty of businesses looking to grow. Businesses that are pivoting to take advantage of a seasonal trend or retailers expecting a jump in orders. They are working hard to keep income streams looking healthy – it’ll be crucial for the longevity of the business, which will in turn keep people in jobs and even create new ones.

To hire new staff, buy new stock, or invest in another delivery vehicle, businesses need funds. This is easier said than done of course. The bank may have a few products, but they might not be suitable depending on the type of business you are.

For example, a retail store won’t qualify for an invoice finance facility. That’s one product off the list already. You may also be close to reaching the limit of your overdraft facility and your bank doesn’t offer business credit cards. In other words, your options with your own bank are limited.

It’s easy to get disheartened once you get a ‘no’ from your bank. Why try another lender? If the bank that is supposed to have your back says no, surely, you’ll be disappointed again with another?

Alternative finance options

There is a thriving alternative finance market that lots of businesses like yours simply don’t know about. When you’re busy managing your business and spinning plates it’s not always easy to assess all of the funding options available. Keeping a close eye on your cashflow takes precedence. But try working with someone who can flag potential options while you still have time, such as your accountant.

There is a multitude of short-term finance products that will help businesses like yours maintain a healthy cashflow and give you immediate working capital:

Asset-based lending

The banks have invested a lot in CBILS even with government-guarantees so we expect them to clamp down on new unsecured business loans. Instead, there will be more appetite for traditional asset-based lending, which works in the favour of businesses that have machinery, equipment, vehicles, property or a debtor book. Not only does it give the lender an element of security in a worst-case scenario, it can be just the ticket for businesses to use their assets to restructure.

Merchant Cash Advance

Asset-based lending, and invoice finance facilities in particular, are unsuitable for retailers that are better served with a Merchant Cash Advance. It is not exactly a loan, rather a lump sum advance payment where the ‘lender’ takes a percentage of future PIN transactions until the amount plus interest is paid back. Because it’s pegged to the value of each transaction and there are no fixed monthly repayments, it’s perfect for the retailer who experiences natural peaks and troughs.

Revolving credit facility

This is also known as a line of credit, an established credit amount that business owners can access as and when needed. Unlike a secured or unsecured loan, where interest is paid on the entire sum, business owners only pay interest on the credit used, not the whole line. It’s perfect for cashflow purposes where the amount can be paid off as soon as an invoice is paid. Borrowers can use the line over and over again – until the end of the agreement that is.

“If you fail to plan, you’re planning to fail”, the saying goes. The longer you wait – and the more pertinent your finance need becomes – the higher the price in the form of interest rates and repayment terms. And crucially, a product of ‘last resort’ could provide immediate relief but prove so damaging to cashflow that it could spell the end of your business.

In the face of adversity, business owners must keep their eyes open to any threats and opportunities. Only by acting in a timely manner will they be able to not just survive, but thrive.

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Lender appetite is diminishing – here’s 3 alternatives if your bank says no

As the list of countries on the UK’s self isolate list continues to grow, it’s fair to say that the 14 day quarantine on Brits returning from holidays has been a huge blow to many who were holding onto a final glimmer of sunshine this summer.

The decision brought yet more criticism of Westminster’s capricious approach to travel restrictions. The hokey cokey nature of the announcements with little warning (islands in, islands out…) have left thousands of would-be holiday makers in a quandary.

Let’s not forget that whilst missing out on a foreign holiday is a blow, the Government has suggested all along that routes abroad won’t be guaranteed and would be subject to the data. Instead we have been encouraged to holiday at home. Huge numbers of jobs and businesses across the UK rely on the influx of tourism not just from abroad, but from all corners of the UK and with the uncertainty of foreign travel prevailing, there could have been a home advantage up for grabs. However, the different approaches to reopening from the Scottish and Welsh Governments has only added to the confusion on what we can and can’t do this summer.

We all understand that, during a pandemic, facts can change and governments must act to keep us safe. Whilst many may argue that a cautious approach is the best, there have been accusations that Nicola Sturgeon’s very public stand against Westminster’s coronavirus policies are part of a wider regime to score political points. Not ruling out the possibility of border restrictions with England and Sturgeon’s initial criticism of Westminster’s air bridges proposal as “shambolic” provoked a backlash from Scottish business owners who argued this sent the message that Scotland is ‘closed for business’.

Mark Drakeford, the first minister for Wales has taken a lighter approach to Westminster’s coronavirus policies, announcing recently that Wales was open to tourists, with the caveat that he would not hesitate to close down areas such as national parks if there were localised surges in coronavirus cases. My fear here is that cross-border rules are all in their different stages, from how many people you can meet, to which facilities are open. England’s road back to normality is three steps, Scotland’s is in four phases and Wales uses a traffic light system.

The confusion will result in a lower number of English tourists travelling either to Scotland or Wales for their summer staycation, opting instead to remain in England. For the small businesses across the UK, especially those who rely on tourism, to them it looks like the country’s leaders are playing politics with their livelihoods as the drop in summer income has been exacerbated by the disjointed approach to easing lockdown.

Let’s look at some of the UK’s tourism stats. In a normal year, Scotland welcomes 5.7m visitors from the UK, a huge number when you consider Scotland’s population is just 5.4m. Scotland also has around 14,000 tourism-reliant enterprises, which amounts to 1 in 12 small businesses and 217,000 jobs. For Wales, 85% of their tourism comes from UK residents, with around 1 in 10 of the workforce being employed in the visitor economy, which contributes six percentof the Gross Value Added to the Welsh economy. Any political decision – or indecision – that discourages English tourists to travel to Scotland or Wales could be hugely detrimental for the small businesses that rely on the visitor economy.

In January of this year, the “Welcome to Wales” initiative published a document, outlining the priorities for the Welsh visitor economy from 2020-2025, after achieving its target growth rate of 10% in overnight visitors between 2012 and 2020. With high hopes and ambitious tourist growth targets over the coming years, it’s heartbreaking to hear of the impact the pandemic has had on the seasonal businesses in Wales.

In a recent BBC article, the difficulties faced by local business owners, reliant on summer tourism was laid bare. Mark Whitehouse, from Powys in Wales, was quoted as saying: “We’re never going to get back what we lost, but at least we’re going to be able to salvage some of the summer.” Zoe Hawkins, operations manager for Mid Wales Tourism, said: “About 95% of the tourism businesses in mid Wales are independent, micro businesses. These are families and communities that completely rely on the tourism sector – people coming into the area, spending in our local shops, visiting attractions and staying in local accommodation.” It’s a relief to see that there might be some respite this summer, where these businesses can try and claw back what they’ve lost. But those who don’t travel across the UK because they are concerned or confused by the different reopening strategies from different Governments will put further pressure on these seasonal businesses.

I understand that caution in a crisis is key and I accept that the pandemic was always going to negatively impact businesses in the UK that are reliant on tourism. Despite this, I cannot escape the feeling that the disjointed approach to emerging from lockdown from political leaders has led to a greater and avoidable negative impact on the small, regional businesses that are so reliant on the visitor economy.

With foreign holidays unlikely but a nation desperate for a change of scene, the UK’s nations could have benefitted from an internal movement of tourists content with experiencing what each country had to offer. That should have been the priority – a lifeline to the small businesses  that depend on tourism – not political point scoring.

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Forget the foreign holiday, the UK tourist industry is under real pressure

Retail is back. Now for hospitality and leisure. In many ways, exciting times. It might not be what it was and we all know it won’t be for some time, but it’s time to make the most of it.

Halving two metre distancing lifted an enormous weight off the shoulders of small businesses readying themselves to reopen. The effect is significant. For example, at least two-thirds of pubs will be able to reopen based on the latest allowance, rather than the third that were believed to be able under the two-metre ruling.

A relaxation of Sunday trading would also have an impact on leisure and hospitality with higher shopper footfall at peak times. Early indications from retail suggest the months ahead will be as challenging for hospitality and leisure businesses, so being prepared and strategic about the return is critical.

What might it look like on the other side? It’s hard to say for each business, but there have been some indicators. Pret a Manger’s global weekly takings are 15% of normal levels. Co-founder of Mexican restaurant chain Mark Selby has predicted that sales will be down by 60% initially – but will return slowly over the course of a year.

There was undoubtedly some pent-up demand with queues outside the likes of Primark and some pubs have been testing the water with take-away drinks, which are proving popular. But footfall is inevitably down. This isn’t helped by the news 600,000 jobs have been lost to lockdown, according to the Office for National Statistics.

Big chains Wagamama, Pizza Hut, and Itsu plus food delivery business Deliveroo have all suggested confidence will be brittle. In a letter they and more than 80 other businesses warned the government may need to take further action on tax, rents and other support.

Looking to the future

Until that happens, let’s look forward. It’s vital to be realistic and have an accurate cashflow forecast and to model for different scenarios. Every owner of a restaurant, cafe, or leisure business simply needs to steel themselves for a battle of epic proportions – and believe they will come out on top.

So, instead of dwelling longer on foreboding news, let’s look at what businesses will be able to do to stand a chance of being ‘reborn’ on the fourth of July. Taking some of the challenges, here are my thoughts on what needs to be done.

Limited space with social distancing – even with it now being a metre – inevitably means lower daily revenue. A sustained heatwave will be a blessing this summer as alfresco dining and quenching your thirst outside become the order of the day.

The government’s Business and Planning Bill allowing bars, cafes and restaurants to serve drinks outside could not come at a better time. Some councils have pedestrianised popular streets to grant businesses the space. Westminster in London has been receptive to campaigns such as the one led by Soho Estates.

If you’re in an area where this is possible, you’ll need to prepare for a new way of serving and put new systems in place to keep costs down. For example, large sporting events have employed higher quality reusable plastic glasses for a while now. With a deposit on each one, littering has been kept to a minimum while any unreturned glasses are effectively paid for.

And who would have thought the Amstel beer advert first broadcast in 2016 would prove so prescient? Depicting a bar that seats just six people, owner Jaap enthusiastically collects 400 discarded chairs for a year when the canal freezes over – turning his small enterprise into Amsterdam’s largest bar overnight.

Ensuring safety must remain uppermost as a consideration for reopening businesses. Masks and disposable gloves for staff, hand sanitiser stations, perspex screens at tills, and deep and frequent cleaning of high frequency touch points should all be on your list.

If you’ve not ordered yet, you should. One business I spoke to has a front and back door and plans to keep both open to ensure a flow of air, while stipulating that customers enter through the front and leave via the back. Most of this will inevitably add an unwanted layer of cost, which sadly brings us to the issue of staff.

The return of furloughed workers will almost certainly need to be staggered. How many will you need? What cover will you have for each role, particularly if some fall sick. And you’d be advised to consult with an HR advisor on rights and regulations. If you are one of the many businesses who have signed up with an online HR platform that provides real consultants, utilise it now.

It’s said that if you’re going to reduce headcount, cut once and cut deep. I would tend to agree, but it’s worth noting research that says businesses that act too defensively tend to “limp” through a recession and struggle to make up the gap again.

And finally, revisit your revenue strategy and don’t simply expect to rely on what worked in the past. I was speaking to the private members’ club Home Grown in London, which is preparing to reopen. Throughout lockdown it has been running virtual events on a daily basis for its members.

This has led to digital memberships, with access to a jobs board, chat forum, and ultimately a digital archive of the many high quality events it has recorded online. Marketing spend has been diverted to a digital agency but the budget maintained. This is important as winners following the last global recession were businesses that did not cut marketing.

In your businesses’ case it might be that you introduce more profitable meals to the menu, make better use of stock to reduce waste, find a hybrid for reduced opening hours vs takeaway deliveries to manage your teams’ hours better, renegotiate credit lines with suppliers, or work harder on cross-selling. Ultimately, cash remains king and having an accurate picture of what your cashflow situation will look like in the coming months will help you sleep better at night. I’ve learnt this the hard way, which is why I started Fluidly. Good luck on July 4th and beyond!

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Reborn on the fourth of July? How hospitality can bounce back

After months away, the big office return is beginning to feel a little more real. But what will have changed?

Trepidatious steps are being made towards a full return to offices and workplaces. Whether in retail or not, the news that all non-essential shops will be able to re-open from June 15, instantly turned many business owners’ minds towards their own office re-start date.

Inevitably it will lead to a series of questions from employees about how this process will be managed, what protocols will need to be followed, and the extent to which some of the flexible working regime will remain in place.

Such has been the length of lockdown that for business owners the next few months may feel like starting over. For office-based businesses, determination to make the ‘new normal’ work has put the notion of returning to pre-Covid routines in a workplace environment on a mental backburner.

And the reality for many is that they and their employees will not be returning to life as it was before the pandemic took over. In fact, in many ways, this is a good thing and one we might all look to embrace. It is the ‘future of work’ stuff we didn’t think we were quite ready for, but turns out – by and large – we are.

Future of work a reality

Video conferencing is the most obvious example. In the bunkered down Covid-19 world businesses large and small have been held together by it. Critical deals have been done, introductions have been made, employees have been bound together by the shared experience, and some have had to receive or relay bad news that in other circumstances could only be delivered in person.

No doubt, some conversations will revert post-Covid-19 to being in the same place at the same time. But there’s a sense that what has changed is somewhat irreversible.

Here are six other things we can expect to see become the new normal.

1. Office sharing with other companies

Covid-19 has had a profound impact on almost every small and mid-sized business’ finances. Very few will return to offices in ruder health than they left, so finding workable solutions will figure highly.

It won’t happen overnight as continued social distancing will prescribe that there is more space between employees, but in time, sharing space with other companies will become more common.

Many businesses will have furloughed at least initially, but may cut back to a leaner team. Office rent on longer leases will need to be paid and one solution will be to match-up with those that have relinquished their larger spaces and still need a convenient location.

2. Leasing office space for only some of the team

The other option for those scouting for space in the next year will be to accept that there is no need to invest in an office fit to house an entire workforce. Instead, we’ll probably all consider whether we only need capacity for 50-60% of our employees.

Trust for many owner-managers has been one key reason why more flexible working practices have not already been embraced. Fears that members of staff wouldn’t be equipped to work from home and that productivity would fall, have largely proved unfounded.

And if anything, the period of lockdown has helped employers identify shirkers and to put in place approaches and measures to ensure everyone delivers. Training and development needs, the social aspects of work, and generating an energy around projects will still often require being together some of the time. But office stand-ups, town hall meetings, client calls and creative sessions don’t have to be done in person.

3. Desktop hardware disappearing forever

Again, some of us have already moved towards hot-desking where employees flexibly use any desk available and most of us operate in the Cloud, living the paperless dream. But until Covid-19 I would suggest the vast majority of our staff felt some ownership of their particular part of the office and often had a few items of IT hardware.

While you can’t lug a second monitor around if dual-screen is your preference, this might be the only thing employers need to have in place. The vast majority though will now be happy to work from a laptop alone with a smartphone to make and receive calls. So beyond call centres, advanced telephone systems and desktop computers are likely to be an unnecessary expense for many. Cashflow management will be all the healthier for it.

4. Heavily limited business travel

Ask yourself, will you be as happy to sign off expenses for planes, trains and petrol in order for members of the team to meet prospects at home and abroad? Will you still see the value in company cars?

Some will, but again, I’d contend that letting people into our homes has broken down all sorts of barriers. Connections and deeper relationships have been forged through virtual meetings and perhaps we’ve become less interested in the facade a salesperson might normally hide behind.

Inevitably there will be times when being seen to make the effort to visit a prospective client will carry weight. Building relationships over lunch will also have a novelty factor for a while, but with finances likely to be uppermost in thinking for some time, we’ll see business travel become a luxury.

5. Rise of virtual events and communities

The same goes for attending events all over the country or abroad. Admittedly, the majority of the value is not in the speaker agenda at big conferences, but in the break-outs, on stands, and at after-parties.

How event organisers will successfully build communities and valued networks in sector verticals remains to be seen, but we’re heading in that direction. An example is CogX, the festival of AI, which like many has gone virtual with a line-up of 600 speakers expected to draw 50,000 virtual attendees.

Critical to its success though will be the networking and the event app’s new ‘meeting maker’ service will no doubt be looked at with interest by other event organisers.

6. Alternative finance providers will become mainstream

Finally, at Fluidly we have been able to see the impact on thousands of business’ bank accounts – the percentage that fell into the red, but crucially, the average overdraft usage.

Inevitably, overdrafts spiralled out of control for many in March and under the government’s CBIL and BBL loan schemes, the incumbent big banks have figured prominently due to their access to cheaper capital.

Under these schemes it’s unlikely many alternative lenders will be able to provide a compelling offering, but this will ultimately change. Delays in approving urgently needed loans and a level of inflexibility around which businesses would be helped, has led to calls for greater access for fintechs.

Open banking and algorithmic decision making would have enabled faster decisions at higher volumes, which might have secured the survival of more small businesses. The pandemic fall-out may lead to a review of lending and Banking Competition Remedies Limited (BCR), which was established to implement measures that support greater choice around lending and switching, will build on the inroads made.

In sum, a faster, more agile, leaner approach to business in many regards will be the legacy Covid-19 leaves us with. And, tough as it has been, in the years to come we will feel the benefit.

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6 things that will never be the same again for small businesses

The services sector contributes around 80% of UK GDP, so why hasn’t more been done to protect it during the Covid-19 crisis.

Like Covid-19 rolling news, the conditions and government support for small and mid-sized businesses change so rapidly it’s hard to keep up.

In the space of a month many people in the UK went from blithely or stubbornly persevering with their daily lives to entering a period of seemingly indefinite hibernation. Shops and restaurants we love were shuttered up and we can’t visit our hairdressers, coffee shops, local theatres or gyms.

And back in the first weeks of the crisis it was entirely appropriate the news agenda and government focused on these businesses. Small business owners unable to serve their loyal customers. Employees laid off or furloughed as soon as the government announced the Job Retention Scheme. The pain so many business owners were going through was palpable.

Service sector being left behind

Yet the services sector is still not getting the attention it needs, given that business to business contributes around 80% of UK GDP. There are hundreds of thousands of creative businesses, agencies, software companies, accountancy and law firms, tech businesses, and others that together employ millions.

Hidden away in their office blocks, they don’t have the visibility of the retail, leisure and hospitality businesses. But the impact – while not measured in footfall – has nevertheless been devastating. And it will be on the economy too if these businesses also go to the wall.

Prior to the announcement of the Job Retention Scheme, which has been a livelihood saver for many, I spoke to many fellow business owners who had already made the impossible decision to lay off members of their teams. Some have been able to act subsequently to instead furlough employees, ensuring they at least receive 80% of the salaries up to the £2,500 gross per month.

Like restaurants and shops, these businesses are unable to access their premises. But the business rates relief that has been extended to all businesses in retail, hospitality and leisure sadly does not apply to the office-bound companies. VAT may have been deferred but will still need to be paid later. Any loans taken now will also need to be paid back. And while landlords cannot evict tenants for now there has been reluctance to reduce rents – often with the expectation of making up any shortfall later..

The costs associated with running service-based businesses are still there and the problems are piling up at a time when they are losing clients. And then there are the many small office support businesses, such as cleaning firms, caterers, that have lost their contracts – at least temporarily.

Admittedly, many professional service businesses are able to continue to function and deal with clients face-to-face thanks to video conferencing. Teams too, can join calls and feel the sense of renewed solidarity the nation has begun to feel as we deal with our rapidly changed world.

But the ripple effect of financial markets collapsing, investment drying up, almost zero street-level footfall, is leading to very worrying cashflow issues – and we’ll see this develop more in the coming months.

More trouble ahead

Covid-19 or coronavirus still felt like a problem affecting others when my company Fluidly first revealed that almost a fifth of businesses were in the red – using their overdrafts. As a cashflow management app, we were able to see the impact months of Brexit uncertainty and then flooding had had on small businesses.

Even a year ago, retailers and real estate agencies were operating on the breadline with 21% and 23% respectively using their overdrafts in February 2019. By the end of February 2020 the corresponding figure had hit 25% for both. Bars and hairdressers, as you might expect, have suffered badly rising from 11% and 13% to 21% and 22% respectively. In real terms we’re talking about hundreds of thousands of businesses in those sectors alone.

But it is advertising businesses (19% up from 13%), consultancies (8% up from 6%), architects (13% up from 10.5%) where there are rising concerns. While the figures are lower, it’s also worth recognising that in February’s figures we had yet to see the coronavirus impact. I fully anticipate an already dire situation becoming catastrophic for business owners and the economy.

First and foremost, concern is for human life, and we all have loved ones we are worrying for each day. Then there are the key workers, particularly the NHS, who put their own lives on the line for us. We have never felt more appreciative of something we too often took for granted.

Once we begin to emerge from this, we will all want our favourite shops, restaurants, hotels to be there. But in an economy where we also rely heavily on the services sector, let’s not forget about those small businesses. I served as a business ambassador for David Cameron’s government, representing the professional services sector, so this is close to my heart. As the government has rightly said, we’re all in this together. So don’t let this invisible killer wipe out the less visible small businesses we need for our economy to thrive.

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Why lack of government help for professional services will hit the economy hard