With the success of the vaccine rollout and lockdown restrictions easing, the UK economy is on track to recovery.
As we slowly make progress, government grants and schemes are expected to gradually end, leaving many SMEs to face an uphill battle of recovering financial losses.
In this article, we explore the upcoming impact of the government schemes ending, and how forward-thinking SMEs can weather any financial difficulties with a merchant cash advance — a type of business funding designed to give SMEs immediate access to financial capital.
Continue reading to find out more.
Current Government Support Schemes and Financial Support Services
At the 2021 Spring Budget, the Chancellor, Rishi Sunak, announced extensions to ongoing support packages to help businesses, individuals and the wider economy as lockdown rules and COVID-19 restrictions are eased.
However, these financial support services aren’t projected to last for much longer, even as some SMEs are only just starting to open back up for business.
Coronavirus Job Retention Scheme
According to the BBC, around 28% of UK employers had staff on furlough in June 2021 (down from 30% in May). The same research also concluded that the accommodation and food services sector saw the biggest reduction in the number of jobs on furlough in June, meaning almost 300,000 hospitality staff were back to work.
The level of grant under the Coronavirus Job Retention Scheme is being reduced each month now, with employers also required to contribute to the cost of furloughed employees’ wages (see table below).
(Table source: Changes to the Coronavirus Job Retention Scheme from July 2021).
Employers will need to contribute more to the cost of keeping their staff furloughed from 1 August 2021, and the scheme is currently set to end on 30 September 2021.
Recovery Loan Scheme (RLS)
When the Bounce Back Loan Scheme (BBLS) and Coronavirus Interruption Loan Scheme (CBILS) ended on 31 March 2021, the Recovery Loan Scheme (RLS) was set up to help every size of business access loans and financial support to help recover after the pandemic and transition period. Up to £10 million is available per business (however, the actual amount offered and the terms are at the discretion of participating lenders).
Businesses who have existing loans aren’t restricted from accessing the RLS, as long as they’re eligible and any additional lending meets a lender’s affordability assessment.
The scheme is open until 31 December 2021, subject to review.
Additional Restrictions Grant (ARG)
Local councils have been provided with grant funding to support local businesses that are severely impacted by restrictions and that may or may not be in the business rates system.
The Additional Restrictions Grant (ARG) is particularly aimed at businesses from sectors that remain closed or severely impacted by the extended restrictions, such as the travel and tourism sector, breweries, nightclubs, theatres, wholesalers, events, caterers, and hair, beauty and wedding-related industries.
Visit your local council’s website to find out how to apply.
What Happens When These Support Schemes End?
What the economic impact will be when these schemes end is a hard one to predict. Effects are largely dependent on how well the economy recovers over the coming months — particularly since the government eased all restrictions on 19 July 2021.
Sadly though, no matter how well the economy recovers in the short term, the UK will undoubtedly see a rise in unemployment. As the furlough scheme phases out, small businesses that are still struggling to regain their financial footing will be under increased pressure to contribute to furloughed staff wages, resulting in rising redundancies, particularly within the cultural, accommodation and food sectors.
And, while the RLS has been an important scheme since BBLS and CBILS ended, unfortunately, it still isn’t enough for smaller businesses heavily impacted by the pandemic. With tighter eligibility and affordability criteria, the RLS is harder for small businesses to access. In addition, the RLS requires businesses to make payments of interest and any associated fees from the outset, unlike the previous schemes where the Government paid the interest and fees during the first 12 months of the loan.
While it’s great many businesses are able to fully reopen now, it will still take many months, even years, for SMEs to recover financially – and, with government support slowly ebbing, as an SME owner you may be left struggling to find further funding in the short term.
The good news is that here at 365 Business Finance we can financially support your business by offering £5,000 to £200,000 in business funding, regardless of whether you’ve previously accessed government loans or grants.
(As Government support slowly comes to an end, SME business owners might struggle to regain financial stability.)
Alternative Financial Support for Businesses and Entrepreneurs
The last thing you need as a business owner is to be going through more financial-related challenges as you reopen and start to kick your business back into gear. In reality, you want to do what you do best — running your business, supporting your staff’s livelihoods and delivering a much-missed service to your customers.
Our cash advances offer instant funding through one all-inclusive cost without APRs or hidden extras, fixed terms or monthly payment plans. We approve 90% of businesses that apply, and funds are usually with you within 48 hours.
To be eligible, your business must be:
- Based in the UK.
- Trading for at least 6 to 12 months.
- Processing card payments through a card machine (PDQ) or online processor.
- Processing at least £5,000 per month in card payments.
Repayments are taken as a small percentage of your future debit and credit card sales. As such, we are the flexible alternative to a bank loan, where the repayments mirror your cash flow, so you only pay us when customers pay you.
(Example of how repayments follow your cash flow.)
What Makes Merchant Cash Advances Suitable for the Current Economic Climate?
While we fervently hope that the impact of COVID-19 dies down once and for all, in the event there are any further restrictions or lockdowns down the line, it’s only natural that you’ll want peace of mind that your business’ finances are safe and secure. This is where our cash advances come into play.
What makes a cash advance such a smart business decision is that they’re financially flexible and scalable. Our merchant cash advances have been designed to adapt to the growth and day-to-day operations of your business.
Our repayment structure is designed to follow the ebb and flow of your business so that your cash flow isn’t negatively impacted by factors outside of your control.
For UK SMEs, our funding has been an ideal source of business finance throughout the pandemic because:
- There's no fixed monthly payments to worry about.
- You only repay when customers pay you (so you don't have to stress during lockdowns or uncertain periods).
- We offer quick capital, with funds deposited into your account within just a few days. Even if you have taken out government loans or grants during the pandemic, our funding is still an option to support your business.
Our financing acts as a quick loan that immediately injects cash into your business, eradicating the long processing times of traditional bank loans. This makes our cash advances the ideal solution for SMEs who need a ‘pick-me-up’ in tough times.
How 365 Business Finance Can Support Your Business
We’re a direct financial provider able to offer merchant cash advances to small and medium-sized businesses across the United Kingdom.
A merchant cash advance is designed as a quick way for any business that accepts credit and/or debit cards to raise capital without the need for a bank loan or hefty overdraft.
Our merchant cash advance product can help give your business capital so that you’re in the most tactical position to help your business thrive.
Start your funding journey with us. Get your tailored quote today.