The 12 month loan repayment holiday has ended

covid-19 loan Jun 09, 2021

The 12 month loan repayment holiday has ended. Small businesses are due to start repaying Covid support loans following the end of the loan repayment holiday.

Bounce back loans were first launched last May, and banks extended £46.5bn to 1.5m SMEs but reports say that already a fifth of SMEs have asked for more time to pay.

One accountancy firm, Mazuma Accountants, says a survey they carried out at the end of May revealed that as many as 39% of small businesses believe they would struggle to meet repayments.

According to the FSB (Federation of Small Businesses) many are unaware of banks’ pay as you grow schemes, which could help with managing the repayments but warns they should ensure they are clear about the impact schemes could have on their future credit needs.

The business environment is likely to remain tricky for many for some time to come and it will take time to ramp up to full activity, especially in the face of uncertainty about lockdown easing,...

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Pressure On Construction Businesses As Materials Are In Short Supply

cash flow May 26, 2021

Building materials are running short in the UK putting pressure on smaller construction businesses.

Supplies of timber, cement, steel, paints and some plastic products have been particularly affected leading to a prediction that materials prices could rise by as much as 7% this year.

More problematic is the effect the shortages may have on smaller construction companies to keep trading leading to cash flow problems, according to the Construction Leadership Council (CLC).

The Federation of Master Builders has said some building firms may have to delay projects while others could be forced to close.

The shortage is being attributed in part to a surge in DIY and building projects during lockdown as well as a surge in shipping costs.

The CLC has called on large construction companies to work with smaller builders to collaborate on bulk buying which the SMEs are unable to manage alone.

In the meantime I would urge SME builders to take advantage of our parent company, K2 Business...

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Insolvencies. Now is not the time to relax

cash flow insolvency May 20, 2021

The most recent Insolvency Service figures have revealed that company insolvencies are 35% lower than before the coronavirus crisis.

The report shows that 925 companies were declared insolvent in April compared with 1,429 in the same month in 2019 and 1,199 last year.

However, we are only at the start of recovering from various interruptions to business and from lockdowns.

Also, sooner or later the Government’s temporary restrictions on the use of statutory demands and on certain winding-up petitions will come to an end.

It is therefore likely that as businesses start to pay back their various Covid-related loans and other deferred payments, insolvencies will rise again.

Begbies Traynor’s most recent Red Flag alert for Q1 showed that 723,000 businesses were now in ‘significant financial distress1’, a 15% increase from Q4 2020 to Q2 2021.

Given all the above, we would urge businesses to continue to very carefully manage their cash flow and beware of...

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Loan repayments, price rises and supply chain issues – a perfect storm?

cash flow debt collection May 07, 2021

As government support for businesses during the pandemic comes to an end a combination of circumstances means it is more important than ever to keep a careful eye on cashflow.

Common sense would suggest businesses should be allowed time to return to full-scale activity and repair their cashflow before they start paying back business support loans or deferred VAT.

However, according to the FSB (Federation of Small Businesses) chief of external affairs Craig Beaumont members are reporting that they are already receiving repayment demands.

While the IHS Markit’s purchasing managers’ index (PMI) for manufacturing activity shows that the sector expanded at its fastest pace in almost 27 years in April they are also being hit by price inflation and supply chain delays.

As an example, British Steel has this month announced a price rise of £50 per tonne for structural steel, its seventh price rise since the summer of 2020.

Businesses needing help can access this survival...

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Cash flow and Bank management

cash flow Apr 28, 2021

The potential for unmanageable debt and for overtrading are identified as two key pitfalls for businesses as they seek to recover from lockdown.

In the latest red flag alert from Begbies Traynor warned that 93,000 more UK businesses had “weakened to the point of 'significant financial distress' in the quarter to the end of March”.

The company predicts that even more companies could slide into insolvency as lockdown eases, citing the reasons above as two likely drivers.

I have warned before about the dangers of overtrading, when a business tries to ramp up its activity too quickly, running up a big rush of sales on credit without the cash to pay its suppliers.

My advice is to always and stringently monitor and manage cashflow and beware of being misled by Balance Sheet figures, which can paint an over-optimistic picture because they include fixed assets and possible new money from investors.

 

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Businsses should consider the RLS implications carefully

cash flow Apr 13, 2021

Can your business cope with another loan?

The latest Government initiative to help businesses to get back on their feet following the pandemic lock-downs came into effect on April 6, 2021.

The Recovery Loan Scheme (RLS) announced in the March budget is only available until December 31, 2021 and so far, just 18 lenders have signed up to participate.

They can be found here on the British Business Bank website.

Be aware that ultimately the lenders will decide whether to approve your application and not every accredited lender can provide every type of finance available under RLS.

There are some protections for borrowers in that lenders will not be allowed to take any form of personal guarantee for facilities of £250,000 or less. Above that amount lenders cannot include Principal Private Residences in the guarantee agreements and that the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of...

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Furlough fraud and directors’ liabilities

coronavirus covid-19 hmrc Apr 07, 2021

The spotlight is turning to company directors as HMRC continues to crack down on fraudulent claims for furloughing staff.

The latest figures show that over 11 million workers have been furloughed in the UK and 41% of employers had staff furloughed. As of January 2021, HMRC had received over 21,000 reports of potential furlough fraud.

The March 2021 budget included an investment of £100 million for the creation of a taskforce to tackle fraud within the furlough scheme.

Among the HMRC powers are the ability to charge individual directors found to have played a role in fraudulent claims under the Criminal Finances Act 2017.

HMRC Attention is particularly focused on claims by insolvent companies or companies where there is a "serious possibility" of insolvency. Directors may face claims for breach of their statutory duties and disqualification under the Company Directors Disqualification Act 1986.

 

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Is A Lack Of People With Suitable Digital Skills Affecting Your Business Future?

employment strategy Apr 01, 2021

Fewer than half of British employers believe young people are leaving full-time education with sufficient advanced digital skills, and 76% of firms think a lack of digital skills will hit their profitability.

The Learning & Work Institute also calculated that the number of young people taking IT at GCSE has gone down by 40% since 2015.

It has been predicted that the future of successful business post pandemic will be in the increasing adoption of robotics, AI and remote digital solutions such as cloud storage and video conferencing.

But is it fair for employers to employers to place responsibility on the education sector? In a fast-changing landscape, how do schools and colleges judge exactly what practical digital knowledge will be needed, especially in such a diverse sector?

There is also an argument that at least some of those skills are best learned “on the job” rather than in an exclusively academic environment.

Should employers become more hands on in working...

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Leaner, fitter and facing the future with confidence?

covid-19 recovery Feb 26, 2021

As lockdown restrictions are gradually eased businesses will be preparing to increase their activity.

But how many of them will emerge as very different organisations from the ones they were at the start of the pandemic?

Some have already changed their offering or target markets to meet the changed conditions, like the marquee rental company that pivoted to offering equipment to clients needing extra space for temporary canteens, classrooms or even warehouses.

The pandemic has forced many businesses to look more closely at their offerings, their processes and the way they work for the longer term.

These already include including switching to using remote working and intending to continue wherever possible, thereby reducing both their office space and their overheads. Manufacturers are likely to automate production lines and introduce AI and robotics.

There will be more investment in internet-based technology, remote staff surveillance to cloud storage and enhanced security systems.

...
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Ignore it and it will all go away?

cash flow crisis Feb 17, 2021

It is very tempting in the current “abnormal” circumstances to ignore the warning signs that a business may be heading into difficulties.

But there is no telling for how much longer the current pandemic restrictions will continue and much of the support offered to businesses has been in the form of loans, or extensions to payment deadlines, that will have to be paid back.

Ignoring it all in our experience does not make situations go away, merely postpones the inevitable reckoning or actually makes the situation worse.

Directors need to continue with their monthly management accounts reviews, their checks on their balance sheets and their revenue generation despite the current circumstances.

They also need to understand their duties and liabilities.

Things may be grim, but there is still help out there.

K2 Partners has a number of guides to help businesses available in the Knowledge Bank of the Online Turnaround Guru website. They cover everything from dealing with debt...

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