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Loan payment holidays are the most common mitigation measure being used by small businesses to help sustain cash flow during the pandemic, a new survey has found.
Research from Purbeck Insurance Services, which provides personal guarantee insurance to small businesses, found that 46 percent of its policyholders are taking steps to manage their cash flow.
Loan payment holidays were the most popular method, used by 47 percent of small business owners surveyed, followed by HMRC deferral (25 percent). The government’s Coronavirus Business Interruption Loan Scheme (CBILS) was cited by 19 percent of respondents.
“Our data shows many small businesses have been proactive and agreed payment holidays with lenders rather than using new loan facilities,” said Todd Davison, managing director of Purbeck.
“We believe this is largely down to a reluctance to take on more debt, although access to the CBILS has been difficult.
“We welcome the launch of the new bounce back scheme but businesses that have accumulated losses of more than 50 per cent of their issued share capital as at 31 December 2019 won’t be eligible, putting some high-growth businesses that have been trading for more than 3 years out of scope, although they may be eligible for the future fund scheme.
“We estimate that around half a million small business owners in the UK are acting as personal guarantors for business loans with their home, life-savings and livelihoods now at high risk.”
Speaking on the use of payment holidays, CEO of NextFin, Sacha Bright, said: “Every financial institution regulated by the FCA has been instructed to work with their borrowers and create payment holidays and many lenders have a one-page form that you fill in online to process an application.
“If you type in the name of your lender into Google and reference ‘Payment Holiday’, usually this will bring up the one-page form required to apply.”
Author: Sacha Bright & Oliver Murphy
Disclaimer
To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed.
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