Riot-hit businesses are unsure about how long they’ll have to wait for emergency funding, a leading financial expert has warned.
Tracy Ewen, managing director of finance provider IGF Group, also urges the government to clarify the qualification criteria and repayment terms. She wants the government to issue “firm guidelines” on repayment terms so that small businesses can make an informed choice about their borrowing and cash requirements.
Her comments come in response to David Cameron’s announcement of a £20m aid package aimed at helping small-business owners affected by the riots, including those whose insurance won’t cover the full cost of the damage caused and loss of business.
The Association of British Insurers estimates the cost to businesses affected by the riots to exceed £100m, suggesting that the rescue package could leave a large shortfall.
“It is absolutely vital to provide financial help to these small businesses straight away, not least because cash starvation will cause the demise of many businesses"
As yet, no details have been communicated as to how soon access to the fund will be given or what criteria will be imposed in order to receive assistance
The British Retail Consortium has also identified measures aiding cash flow as important, suggesting that a temporary waiver of National Insurance contributions for affected businesses should be considered.
Ewan says lessons have to be learned from a similar allocation of emergency funds – also £20m – given to banks following the credit crunch to distribute to small businesses. She recalls that small businesses were promised fair repayment holidays, only to be told later to pay up quickly or face prosecution.
“Delaying HMRC payments and deferring council tax is all well and good, but what proposals is the Government outlining for repayment? Doesn’t this sound similar to the story at the start of the credit crunch when businesses were given repayment holidays and time to pay, only to be told later down the line that they must bring the arrears up to date or risk prosecution?”
She adds: “Firm guidelines must be communicated so that small businesses can make an informed choice about their borrowing and cash requirements. My advice would always be talk to advisors to plan cash flow for the next few months, rather than fire-fighting on a day to day basis.”
The coalition is already working on a long-term plan to revitalise shopping areas, as it will shortly launch an ‘enterprise fund’ to help rebuild areas damaged by riots.
Meanwhile, RBS has also set up a relief fund, totalling £10m, for small-business customers directly affected by the riots. Interest-free individual loans of up to £25,000 will be given for a six-month period. Companies can then opt to repay the loan or transfer it to other product offerings from the publicly owned bank.
