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After the pandemic: what more can banks and government do to support SMEs?

Mark Curran, Director, Business Banking, TSB

Kevin Hollinrake MP – Chair of the All-Party Parliamentary Group on Fair Business Banking


It’s no secret that a lot of small businesses have been hit hard by Covid-19. Both at TSB and through the work of the All-Party Parliamentary Group (APPG) on Fair Business Banking, we’ve seen the determination and sheer hard work firms have put in to adapt and survive through the toughest environment most of us can remember.

The resilience small businesses have shown has been truly inspiring. Business life is beginning to return to something like normal, so at this crucial turning point for the national economy, we wanted to take the temperature of the small business community, to understand the big issues facing the sector and find out what help and support businesses need for this next chapter.

We’ve been talking to chamber members across the country as part of our ‘Cashflow Roadshow’ with the British Chambers of Commerce. This is what we found:

1.Businesses Seeking New Opportunities

Despite the impact of Covid-19, small businesses see opportunities in the new world that is emerging. As many people continue to work from home regularly, their spending patterns have also shifted closer to home, which is, in turn, more likely to favour local businesses. Consumers and other businesses are also putting more emphasis on supporting local producers and suppliers. In short, there is a strong sense that small businesses have an important role in ‘building back better’. That shouldn’t disguise, though, that businesses have some very real concerns too.

2.A new view of finance

Several small businesses highlighted that, thanks to the finance they were able to access through BBLS and CBILS, they had been able to invest in plant, equipment, marketing and training. This meant that they were well placed to capitalise on new opportunities. While many remained wary of using finance to grow their businesses, and debt levels are high for many, some felt it had been a positive experience and would be more open to using finance to fund future growth.

3.Debt concerns

As always, cashflow is the number one consideration for most small firms. Covid-19 has left many business owners facing an unfamiliar and unwelcome burden of debt. Having often previously run their businesses debt-free, the impact of the pandemic left many needing to draw on government support. As we move into 2022, repayments are likely to become an ever more pressing issue and the cashflow challenge will take on a new dimension. And larger businesses need to ensure they pay smaller suppliers in a prompt and fair way.

4.The importance of communication

Although experiences vary, many businesses felt banks needed to engage better with them. Some were unaware of the Pay As You Grow scheme, while others weren’t fully aware of the terms of BBLS and had decided to not apply. Many stressed that they had struggled to speak to a person at their bank during the height of the pandemic and felt that there had been a poor level of communication from banks and government about the terms and benefits of government support.

5.Shortage of materials

Alongside the prospect of higher debt repayments, a number of our roundtable participants cited the availability of materials as a key concern at present. This was particularly the case in the construction industry, where supply shortages have led to steep price rises for some materials. Many also cited issues with the availability of labour.

6.Late payment

Where input costs are higher, it’s all the more important that firms are paid promptly for their work. Late payment continues to affect cashflow for far too many small businesses. Ultimately, it can be self-defeating for the larger firm as it threatens the integrity of their supply chains. As signatories to the Prompt Payment Code and, as part of its Do What Matters Plan, TSB is committed to paying all suppliers in ten days. In fact, it goes further than that, paying 96% of its SME suppliers within seven days of invoice.

How your bank can help

There is an important role for banks in supporting their business customers.

During the pandemic, TSB supported its business customers with around 25,000 BBLS loans, totalling nearly £600 million, and is now working with customers to help them manage their repayments.

Lenders can offer flexibility on loan repayments: subject to eligibility, there are ‘Pay as You Grow’ schemes for firms that have taken BBLS loans, and lenders can consider payment holidays, reduced payments, or extending the term of the loan.

It’s important to bear in mind that this can increase the overall cost of borrowing and won’t be right for all businesses – but reducing monthly payments can be an important lifeline for some.

We’d encourage businesses to talk to your lenders regularly if you’re not already doing so, and especially if you’re worried about impending loan repayments.

It’s also worth checking what protections your bank offers against fraud. At TSB we provide both our business and personal customers with a Fraud Refund Guarantee – so that if you’re the innocent victim of fraud on your TSB account, you know that any money lost will be refunded.

Building relationships

Banks can also support businesses in other ways. Building relationships with customers and understanding their businesses, makes it easier to offer the right support at the right time. Lockdown made this more difficult, but TSB felt it was important to keep up that regular contact and made support available via video banking.

Covid-19 has accelerated the trend towards online shopping and cashless payments. Banks are clearly well placed to help business customers manage this transition. By developing strong partnerships with other suppliers, lenders can also help small businesses establish an online presence. This was hugely important during lockdown – and will continue to stand businesses in good stead in future.

The government set up Banking Competition Remedies (BCR) to encourage business customers to switch their accounts from the former RBS group. TSB was recently awarded £6 million from BCR, which will be used to invest in further improvements to its business banking offering.

At TSB and the APPG for Fair Business Banking, we see a bright future for the small business sector. Working with British Chambers of Commerce and others we want to support small businesses and ensure they have access to the finance they need. Small businesses are a great British success story and we want to do our bit to make sure they can continue to recover and thrive.

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