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1 in 7 SME Owners Using Savings to Stay in Business During Pandemic

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The huge pressures facing SMEs in the context of coronavirus is leading to large numbers of company owners using their own money to keep their businesses operational.

That’s according to a new set of figures on the subject, which suggests that around 14 per cent of SME owners have used their own money in support of their enterprises.

Almost half of the 500 SME bosses who were polled on these issues recently said that their business had been negatively impacted by the coronavirus pandemic and the associated lockdown.

There are widespread concerns about how much of an impact the virus situation might have on the UK’s SME sector, with recent polls suggesting that as many as two fifths of all small-scale operators might soon be facing the prospect of being forced out of business.

Around 800,000 SMEs are estimated to have taken out loans via the government’s Bounce Back Loan Scheme, which has distributed more than £2 billion in finance over the course of recent weeks.

The Bounce Back scheme involves the government providing 100 per cent guarantees for loans given out by intermediary banks and other financial service companies. 

Huge numbers of SMEs have benefitted in the short term from receiving the emergency loans but there are fears that many of those enterprises will ultimately be unable to pay back the loans they’ve taken on because they’ll continue to struggle financially well into 2021.

Nucleus Commercial Finance carried out the research that found one in seven SME owners have already put their own money into their businesses since the virus crisis began and its chief executive Chirag Shah has described the recent findings as “alarming”.

“While some owners might believe that this is the best option for short-term cash flow needs,” he said, “taking this measure can have a detrimental effect on the business and also their personal situation, especially if activity does not improve immediately once lockdown measures are eased.”

Recent research carried out by the business insurance company Simply Business found that SMEs expect the coronavirus crisis and the lockdown to cost them on average around £12,000.

That kind of hit could be enough to push many thousands of SMEs across the UK permanently out of business.

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