Yesterday (3rd March) Chancellor of the Exchequer, Rishi Sunak, announced the 2021 budget. It was a highly anticipated event as the coronavirus pandemic has so far caused unprecedented changes to the UK economy with 2020 bringing never-before-seen business support packages from the government.
The major take-aways for businesses in the recent announcement are the prolonged furlough scheme, increased business rates to 25%, and the Recovery Loan Scheme, a new debt finance programme. The furlough scheme remains largely unchanged with an extension from April to September 2021. And while the 25% business rates are sure to be unpopular, an increase was expected. The proposed rates are still competitive compared to most other markets.
The new Recovery Loan Scheme is sure to see a major take up and will give businesses of all sizes access to funds, 80% secured by the government. These will start from £1,000 for invoice finance (£25,000 for loans) up to a maximum of £10 million. This will replace the existing CBILS and BBLS schemes, which are still scheduled to end in March 2021. Companies that have already used CBILS and BBLS can still apply for the Recovery Loan Scheme.
92,000 businesses have already taken advantage of government schemes in 2020 borrowing £22 billion. We’re sure that more will follow suit with the newly announced provisions. The new scheme won’t have such generous terms as their CBIL/BBL predecessors with businesses expected to be paying interest from the outset.
Of course, government support can’t go on for ever. The lesser benefits of the new scheme are a clear change to try and get business back to normal whilst keeping the companies most needing assistance afloat. It will be interesting to see more details when the scheme is released. We would hope that these changes have the desired effect of moving more companies into long term funding facilities and away from short-term damage control.
Companies will inevitably be looking for different finance types to suit their needs. The added flexibility of alternative funding will be a huge positive for businesses that don’t want to be locked into the up-to-6-year repayment terms of the new government loans. Businesses will still need to repay the loans they have taken out and invoice financing can support their monthly cash flow requirements.
We’re glad to see the Chancellor acknowledging the importance of UK SMEs as well as the difficult situation many find themselves in due to the now over a yearlong pandemic. The plans announced yesterday are a good step forward in protecting businesses and more importantly, the people behind them.
At Optimum Finance, we utilise innovative technology to offer a range of flexible funding solutions, which grow alongside your business. Get an instant quote for the amount of funding you could access by entering your annual turnover into our web app. Products include invoice discounting and factoring that can boost your cashflow and give you access to a dedicated credit control team.
Email or call us to speak to our experienced team of experts and find out how invoice finance could help your business. We pride ourselves on getting things done quickly and providing access to cash within 24 hours of approval. We are passionate about finding solutions and delivering to clients’ needs.