A press conference yesterday afternoon saw Rishi Sunak announce new financial measures to bolster the UK economy, including further funding for small businesses, following on from the £12 billion support package committed during the Budget last week. The new measures include a £330 billion scope for loans for struggling firms, regardless of their size, and loans of up to £25,000 for businesses in the hospitality and retail sectors – the business rates holiday has also been extended to 12 months for firms in these sectors. Small businesses are also able to apply for loans of up to £5 million, with no interest due for the first six months.
Although the Government’s efforts to support small businesses are admirable and will undoubtedly go far to help, they are ultimately short-term. Once this immediate relief is over, small firms could find themselves with a build-up of debt.
In unprecedented times, the Government have announced unprecedented measures to combat the impact of COVID-19. The gargantuan amount of £330 billion to support UK businesses will go far, however the nature of this money – promised in the form of loans – is only enough in the immediate interim.
Many start-ups and scale-ups will be operating at a loss already, as is the nature of these types of businesses within their formative, foundation years, and many will also have a backlog of historical debt. Taking out a new loan now will provide temporary relief; however ultimately their debt will simply compound. The Government perhaps should have offered assistance by way of providing further cash grants rather than loans.
There are three stages to be addressed in this crisis: managing the effects of the immediate impact; the recovery phase and, eventually, the growth phase. Private investors can, and should, help small businesses through all of these stages.
Financially, this is a testing time, and small businesses are fragile to say the least. They stand to take the biggest blow following the epic impact of COVID-19 and – although this much-needed cash injection from Sunak will be of assistance – beyond this period, the entire community of private UK investors will need to pull together beyond the period of immediate recovery.
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