The government’s furlough scheme is winding down, plus the Coronavirus Business Interruption Loan Scheme (CBILS) is shutting shortly. This will put huge pressure on small businesses – how can they manage the financial impact?

The phasing out of the Coronavirus Job Retention Scheme, under which the government has covered a large percentage of furloughed employees salaries, has begun. The subsidy dropped to 70% of wages at the beginning of September and will decrease to 60% on 1 October. It is scheduled to close completely at the end of October.

At the same time, CBILS is coming to an end. The scheme, which has supported the continued provision of finance to small businesses and has proved a lifeline for a lot of companies, will close at the end of September.

Key support schemes closures ramping up pressure on SMEs

These developments leave small business owners facing some tough choices. Despite the government offering financial incentives to companies for continuing to employ furloughed staff, such as one-off bonuses, many owners are preparing to take some unwanted steps as they look to keep the books balanced and safeguard cashflow.

The prospect of such action, and in particular mass redundancies, has led to calls for continued government support for small businesses. A group of Conservative MPs is lobbying for a targeted extension of the furlough scheme, while a state-backed thinktank is arguing that small firms should only start repaying coronavirus debt when they are making a profit again.

Managing the financial hit of the closure of key schemes

Whatever action the government takes in the coming weeks and months, it is more crucial than ever that small businesses are aware of all the funding options available to them, from ongoing emergency support schemes to the services of alternative lenders.

In the wake of prolonged caution from traditional lenders, alternative finance facilities such as invoice finance, asset finance, peer-to-peer lending and crowdfunding are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment. These facilities, which offer a more personalised approach to lending, are helping small businesses survive and target regrowth.

Notably, alternative lending is playing a prominent role in the government emergency support schemes, in particular the Coronavirus Business Interruption Loan Scheme, which is connecting firms and the self-employed with loan, invoice finance and asset finance facilities. This profile is helping cement the reputation of alternative finance in the business sector.

What SMEs need to know about funding options

The autumn is set to throw a fresh set of challenges at small business owners. If they are to successfully manage the impact of the end of key support schemes and maintain forward momentum while protecting their cashflow and workforces, it is vital that they know about all the financial tools that they can access, including alternative finance.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.