SMEs need more breathing space, but fear of accumulated debt remains

SMEs need more breathing space, but fear of accumulated debt remains

Quantitative easing and extended government support are vital for SMEs’ survival, but repaying their debt remains a challenge

SMEs need more breathing space, but fear of accumulated debt remains

Despite an additional £150bn in government bonds purchased by the Bank of England (BOE) and extended government support provided to UK businesses, more needs to be done to keep SMEs alive, particularly as debt will accumulate over time, says Douglas Grant, managing director at Conister bank.

“What we are doing is stacking up a problem for the future in terms of how SMEs are going to be able to repay that debt,” he says. “SMEs are going to have to deal with an additional debt that they’ve taken on.”

Conister is currently working with businesses that have been impacted significantly by the pandemic, such as companies in the brewing or agriculture sectors.

“The talk is now around whether we should be looking to put that debt into something incredibly long term, for example. But only the government can afford to take that length of view,” says Grant.

While extending the Bounce Bank Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) is a step in the right direction this means lenders will be allocating money against a three or five-year loan.

“Let’s say that five-year loan gets pushed out to seven years, you’re creating a mismatch between your asset and your liabilities. It’s not material for us, but for other banks, it might be a material mismatch of which they have no real control over, and they’ll have to deal with that in terms of liquidity reasons,” he explains.

Bounce Back Loans are yet incredibly low yield and have an administrative burden to them, according to Grant.

“We are more interested in CBILS – it gives you a chance to look into the companies and understand which sector they operate in, but then it’s a competitive advantage.”

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata

1y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

1y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine

1y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021

1y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource