With the fallout from Brexit, global supply chain and labour issues, lingering Covid-19 cases and financial pressure on day-to-day costs caused by the geopolitical conflict – there’s been a lot for business owners to come to terms with.
However, news of progressive discussions taking place this past week between the government and city bank executives regarding a new guaranteed loan scheme suggests that the calls for greater sustained support for SMEs are now being heard.
Currently, there are around 5.5 million small businesses active in the UK, and entrepreneurial hunger shows no signs of abating. A study into UK self-employment trends found that over the past two years, the number of people considering starting their own business grew by 36%. In January 2022, monthly searches for ‘how to start a business’ were 45,000. This number was 33,000 in March 2020.There has been a 10% increase in searches regarding the process to secure a business loan.
Should the scheme get the go-ahead, this would provide a much-needed financial safety net for millions of people who would otherwise struggle to secure the financing needed to support their business efforts. The SME sector now also accounts for around half of turnover in the UK private sector. This scheme would not only provide finance for business owners on a personal level but also protect the financial contribution this vital and innovative sector delivers to our future economic growth.
Indeed, it’s been reported that 25% of SMEs would struggle to launch new products and services without first securing finance. Aside from immediate recovery post-pandemic, the top three reasons business owners cited as to why access to permanent lending streams is so important, included to increase their headcount and/or hire new people (30%), to launch new products and/or services (25%) and to commission a corporate marketing and/or advertising campaign (24%). From these findings, it is clear where simple access to funding could really help support budding businesses meet their objectives this year onwards.
As part of the recent discussions, special attention has also thought to have been paid to how best the scheme will support growth in UK businesses, including those in “levelling up” areas of the North, rather than purely cover survival or recovery from the pandemic. A laser-focus on this is crucial. Our own research found 47% of SMEs believe regional inequalities are impacting the financial health of their business, while 42% said they are affecting their ability to get a loan from a bank.
But there could be delays ahead. Covid bounce back loan repayments have had a bad rap recently, and with each new fraudulent case reported, there is a real risk the scheme never actually sees the light of day. To turn talk into action, many will be expecting a timeline to get the scheme off the ground, clarity over who and how it will be regulated and clear guidance on criteria for prospective borrowers. Indeed, when it comes to the levelling-up agenda, only a third of SMEs in our survey believe that the government will actuallydeliver and this new scheme risks being faced with the same pessimism. Using technology to assist in the rollout of this scheme and make the application process as smooth as possible (perhaps via a portal) would be one simple solution to speed up the decision-making process. We pride ourselves on our speed and pragmatism when it comes to granting finance and with finances being so tough across the board right now, transparent communication and efficiency are vital.