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Alternative Finance blog

How Will the Bank of England Interest Rate Cut help small business

How Will the Bank of England Interest Rate Cut help small business

28 days

Author: Sacha Bright, CEO

Why discourage start-ups by cutting one of the very few tax benefits they get?

The Bank of England has cut interest rates today to 0.25%, will this help small businesses? 

If you have a variable overdraft you may benefit but most small business loans are on fixed interest rates. Will the cut encourage banks to lend to small businesses? It shouldn’t change their policies. The sad thing is if a business needs short-term finance and it is in a downturn, lenders are generally reluctant to help.

The government needs to do more to provide security for banks. Perhaps even create a fund that banks can draw on to lend to businesses that are in trouble from the coronavirus.

I suspect we will see a vast number of restaurants and tourist industry related businesses file for bankruptcy over the next 6 months. The knock-on effect of paying unemployment benefit and no tax revenue collections will far out way the cost of a short-term loan.

It also brings attention to the proposed Entrepreneurs' Relief Cut that has been rumoured to be announced in this year's budget. The self-employed receive no sick pay, no redundancy or job security and they get no tax relief on the investment they make to start their businesses. Entrepreneurs are the pioneers that create jobs and tax revenues in the UK. 

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