Dealing with the challenges of the pandemic has been incredibly difficult for businesses across the board. A combination of lockdown restrictions and many businesses having to temporarily close their doors has meant that some companies have taken the option of new finance in order to better manage their cashflow. At Barclays alone, over 350,000 businesses were supported with access to more than £29b worth of funding through the government lending schemes during the height of the pandemic. While taking on new finance may not be a new experience for larger organisations, for some SMEs, this may be the first time they are managing business debt.
As we edge out of the pandemic and start orienting towards business recovery, it’s important that SMEs especially are provided with support and advice on how to handle their debts.
Below, Abdul Qureshi, Head of Products and Platforms at Barclays, has put together some guidance and considerations for businesses who are due to start their repayments soon.
- Flexible payment terms: SMEs should check their loan options online or talk to their lender about their repayment terms, as these may be flexible. For example, negotiating a longer payment term to help spread out costs could be an option. If repaying a Bounce Back Loan, businesses may be eligible for Pay as You Grow (PAYG), which allows them to extend their term loan from six to 10 years, temporarily reduce the monthly repayments to interest only, or even take a payment holiday for six months. Another recommendation would be to not leave it too late to choose their PAYG options, as some banks will require at least 20 days’ notice for the option to come into effect before their next payment.
- Monthly repayment amount: Once the repayment terms have been determined, businesses can work out their monthly repayment amount using online calculators. This is done by inputting the amount borrowed, the monthly interest, as well as the length of time over which they’re going to repay. There are also calculators tailored for Bounce Back Loans that serve as a helpful tool for SMEs wanting to calculate their monthly repayment amounts.
- Identify any problems early: To assess cashflow and profitability, small business owners should build a budget to identify any issues that may arise with repayment amounts early on. They shouldn’t wait for things to get better nor be afraid to ask for help. Instead, businesses should be encouraged to talk to their bank or lender promptly, share the challenges they’re facing, and address any issues together sooner rather than later.
- Support and resources: If they’re worried about finances or repayments, SMEs can contact their bank or lender as soon as possible. Useful guidance is also available on the Barclays money management hub. For further free advice, businesses can contact organisations such as the Business Debtline, National Debtline or Citizens Advice
Managing business debt may seem daunting initially, however SMEs can take a considered, step-by-step approach to dealing with repayments to help them get ahead of things before they become an issue.
Following the advice above and leaning on the resources available will not only reduce the financial pressure on SMEs, but it will also help set businesses on the path to a healthy recovery from the pandemic.
Author: Abdul Qureshi, Head of Products and Platforms at Barclays