Brokers urged to help SMEs brace for ‘D-day’

Ms Starkins said she is concerned that businesses have not assessed whether their cash flow positions are sufficient to manage the resumption of their debt obligations.

The Scottish Pacific executive said SMEs should consider obtaining credit to absorb the potential financial shock.

“When COVID-19 hit and JobKeeper and other initiatives were put in place, September seemed a long way away – it’s only a week away now, and small businesses need to act,” Ms Starkins said.

“We are having regular conversations with brokers and accountants who realise their clients need funding in place to pay expenses they have been deferring, including rent, asset finance, PAYG, superannuation and payroll tax.”

Ms Starkins urged brokers to canvas funding solutions with their clients.

“Brokers can play a pivotal role in encouraging their SME clients to work out their obligations now and take steps early if they don’t think they’ll be able to pay everything that has accrued,” she added. The wave of debt coming at some businesses will be too great if they do not start planning for it now.

“These trusted advisers have a real role in helping their clients see into the future more clearly and then working with them to ensure they know exactly what they’ll need to pay over the next four months.”

She added: “It would be heartbreaking if a business finds itself in a position in October where it has to choose between paying their overdue rent or purchasing stock to sell in the lead-up to Christmas.”

Ms Starkins stressed that it’s vital for SMEs to identify the cost base of “operating in this new normal” to ensure they can respond appropriately by reducing costs or exploring funding solutions.

“Businesses concerned about taking on debt should also be concerned about how they’ll be paying their bills. Not paying bills doesn’t mean the debt does not exist. All the unpaid bills and deferred expenses are real debts that need to be paid,” Ms Starkins said.

“Business owners are reluctant to extend their borrowings. They are busier than ever trying to navigate the COVID-19 environment, which means accountants and brokers have a crucial role to play in making them aware of other funding solutions.”

“Now is an ideal time for business owners to find new funding paths that harness the value of assets already in their business, such as their sales invoices or plant and equipment. It’s also the time to protect the family home by unlinking it from a business’s debt.”

[Related: SME lender acquires invoice finance platform]