Coronavirus: the stark facts about SME cash flow

More than two-thirds of UK SMEs have reported significant pressures on their cash levels according to latest insights from business lender Market Finance.

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 links.

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 yet been paid and that these were unlikely to be settled before the end of March.

This has a detrimental affect on a company’s working capital which is why 36% of business owners feared they won’t survive to Easter if they were unable to secure some finance.

CEO Anil Stocker

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, said: “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.”

Owner Anneliese Parnes

 SME owner Anneliese Parnes, CEO of Dynamite Promotions International, a merchandise specialist for film and entertainment said: “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 six 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.”