SMEs: 69% facing cash flow strains from Coronavirus
- Supply chain: Shocks could derail even the most established and well-run SMEs.
- Access to cash: Businesses need to prioritise ways of getting access to cash flow, whether that’s drawing down on existing credit facilities or turning outstanding invoices into cash.
- Budget 2020: Call for support from Chancellor to help businesses weather the storm.
11th March 2020, London: Over two-thirds of UK SMEs (69%) have reported significant pressures on their cash levels according to latest insights from business lender MarketFinance. This is in large part down to businesses paying for supplies earlier than anticipated because of coronavirus-related stockpiling and fears of deeper disruptions to transport (road, air and rail) linkages.
Additionally, on orders and work that has been completed, payments are being delayed. Three-quarters (74%) of business owners reported invoices due to be settled at the end of February have not been paid yet (as of 10th March 2020) and that these were unlikely to be settled before the end of March 2020.
What is working capital? Put simply, working capital is the cash your business has readily available to use for day-to-day operations. Put less simply, working capital is whether or not your current assets are enough to cover current liabilities. Working capital is also sometimes referred to as operating liquidity, cash flow and current ratio.
Over a third (36%) of business owners feared they won’t survive to Easter (6 weeks) if they were unable to secure some finance to bolster their business. Meanwhile, as economic conditions worsen, and with the possibility of widespread quarantine implemented across parts of the country, businesses will need to have financial and operational contingency plans in place to protect jobs, industry and communities.
Anil Stocker, CEO at MarketFinance, commented: “The impact of the coronavirus spread is being felt by SMES across the UK as finance and supply chains are disrupted. At the best of times, only around half of these businesses are cash flow positive. Today, businesses are feeling a palpable sense of helplessness and isolation and there is a lack of specific information on how to cope with the crisis.”
“At the moment cash is king and if businesses are being starved of this cash, it will leave them stranded. Whilst policy efforts play out to contain the spread of coronavirus, business owners should brace themselves for some turbulence and have a prepared mindset for the scenarios ahead.”
SME business owner Anneliese Parnes, CEO of Dynamite Promotions International Ltd, a merchandise specialist for film and entertainment commented: “I’ve been in business for 28 years and have never seen anything like this. Production of our products has stalled in China and a number of my clients in the Film, Entertainment and food industries have pushed their launches and events back 6 months.
China will get back up and running because they move fast there but it’s uncertain if, we in the western world, will be able to get back on track as quickly. I’ve been able to unlock cash from my outstanding invoices from MarketFinance to keep the business in motion and give me some breathing space whilst the dust settles on coronavirus disruption”.
Anil Stocker added: “Rishi Sunak has a golden opportunity to prove that he is a champion of UK SMEs. There is a role for Government to work with businesses, banks and other lenders to ensure a resilient economy. It will be the smallest businesses that are most hit as they have the least bargaining power in global supply chains. They could, for example, give businesses VAT/tax ‘holidays’ to ensure that they have enough money to cover immediate costs.”