Greater Support Needed For SMEs To Survive Debt Deluge
SMEs need more clarity from the Government to help them survive the deluge of debt that so many will face in early 2021.
Dated: 30 July 2020 Author: Richard McNeilly, Managing Partner
One of the biggest issues facing SMEs in 2021 is that of how debt deferred in 2020 – such as VAT and income tax – is going to be treated by the government and their agencies.
On top of this, many SMEs have borrowed via bounce back loans and the Coronavirus Business Interruption Loan Scheme (CBILS), which have 12-month repayment holidays, and so payments will start in the Spring of 2021.
Without clarity, many businesses will understandably be taking drastic action now in order to minimise the risk of being unable to pay the likes of deferred Income Tax, VAT and their Bounce-back loans at the time due. The most likely impact will be higher redundancies than might be necessary.
So we’re calling on the government to introduce measures that provide further support to SMEs and take action now to address this worry,
Together with our colleagues at the UK200Group we have produced a paper which details recommendations on several financial problems affecting SMEs as a result of Covid-19. This paper has been sent to, and is currently being considered by, the government.
Measures which are being recommended include:
• Consolidate certain debts into a single business support loan owed to HMRC.
• Establish a threshold for loans repayments based on a criterion such as: average profits of the last 3 years, size of business and size of loan.
We are encouraging SMEs to get behind our proposals by writing to their local MP to encourage them to support the introduction of the measures and have produced a template letter that SMEs can use, which is available to download here
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