Budget 2021 has provided small businesses with short-term security, with loan schemes and tax holidays extended, but the longer these initiatives last, the more debt firms accrue. The question, how will they be able to balance the books and regrow later?

The Chancellor provided a significant amount of immediate support for small firms in Budget 2021, extending the furlough scheme, with the introduction of the Recovery Loan Scheme, and business rates relief and VAT reductions, as well as announcing the launch of the super deduction investment scheme.

Understandably, the focus is still on survival, on helping firms tough out what will hopefully be the last months of the Covid-19 era. However, as thoughts turn to the post-Covid-19 marketplace, there is a need to look further ahead, and while the super deduction scheme will encourage businesses to invest and grow, there is an elephant in the room: Covid-19 loan repayment.

Covid-19 loan repayment and regrowth: how can SMEs do it?

The focus for firms will be on rebuilding and regrowth, but they will have to do this at the same time as repaying Covid-19 loans. And the longer the schemes are in place, the larger loans will become. When it comes to repayment time, balancing the need to meet these obligations with the need for capital for investment, while maintaining cashflow, will be far from easy.

The government may choose to restructure Covid-19 loan repayment in a way that eases the burden on small businesses, but the introduction of such terms shouldn’t be taken for granted. Recent discussion surrounding NHS pay increases suggests that the government feels it has limited room to manoeuvre financially.

So, how can small businesses move forward with recovery and regrowth and manage Covid-19 loan repayments costs? How can they manage cashflow so investment and repayment can be accommodated at the same time?

Awareness of all small business finance options is critical, from government schemes and traditional lender facilities to the services of alternative lenders.

Repaying Covid-19 loans and how alternative lenders can help

With regard to the alternative lending sector, in the wake of prolonged caution from traditional lenders, which is an issue that has returned during the coronavirus pandemic, alternative finance facilities such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target regrowth.

Notably, alternative lending is playing a prominent role in government emergency support schemes. A key part of the soon-to-be-closed Coronavirus Business Interruption Loan Scheme, invoice finance and asset finance will be integral to its replacement, the new Recovery Loan Scheme. Invoice finance and asset finance between £1,000 and £10 million per business will be available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

Covid-19 loan costs and small business finance options

Covid-19 repayment loans are a lifeline for small business, but they have to be repaid. And firms have to plan for this, while also putting in place and funding a roadmap for regrowth. Such development will not be easy. This is why it is important that SMEs are awareness of all the finance options available to them, including the services of alternative lenders.

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