UK SMEs need hugely flexible debt repayment schemes in order to survive the next 18 months, a leading industry report claims.
The quarterly SME lending monitor, by online business funding marketplace Funding Xchange, highlights the need to address reduce the financial stress currently being experienced by 40% of the SMEs who have had to borrow from alternative lenders.
Funding Xchange is an online portal which directs small and medium businesses (SMEs) unable to access funding from traditional high street bank to other lending providers.
The data shows 40% of UK SMEs that currently have loans from alternative lenders are now in discussion with these lenders, as they are struggling to fulfil their repayment programmes as a result of the coronavirus lockdown impact. Alongside this many of these lenders are now facing issues themselves with limited capital. Without this flexible approach option that ensures struggling borrowers can make repayments at some point, the lenders themselves may be forced out of the market, reducing the competition that the government has been so keen to establish.
A spokesperson at Funding Xchange said.
“It’s no surprise the data we have collected through the Funding Xchange platform over the past quarter indicates that many businesses are facing a difficult financial future in terms of their cashflow,” said Katrin Herrling, chief executive of Funding Xchange.
“To address this, the government introduced the guaranteed loan support schemes, with repayments of these loans typically delayed by 12 months. Unsurprisingly, a large proportion of businesses have also sought concessions from alternative lenders as they their cashflow dried up during the crisis.
“There now needs to be a focus on how the repayment programmes are managed if we are to avoid putting businesses under further cashflow pressure, and potential failure, with a knock on impact to the lenders.”