Spring budget: mixed reaction from SME lenders

Small and medium-sized enterprise (SME) lenders gave a mixed reaction to the spring statement, welcoming tax cuts and expanding research and development (R&D), but calling for more action .

Chancellor Rishi Sunak (pictured) has announced a 5% reduction in fuel tax per liter and a temporary 50% business rate relief for eligible hospitality businesses up to £110,000.

He revealed plans to raise the threshold at which people start paying National Insurance to £12,570 in July and cut the basic rate of income tax from 20p to 19p per pound by 2024.

Employment Allowance, which relieves small business National Insurance payments, will rise from £4,000 to £5,000 from April and the government will reform tax credits for research and development (R&D ).

Ravi Anand, chief executive of alternative lender ThinCats, said businesses will benefit from reduced fuel duties, but despite government support, insolvencies will rise in the coming months.

Read more: Wave of insolvencies expected next year

“Most are aware and wary that inflationary costs will have to be passed on to their customers, so anything that can reduce pain is helpful,” Anand said.

“There is of course an interest in improving productivity and reforming corporate taxation, but we will have to see the detail when it appears.

“Small businesses have borrowed significantly more than medium-sized businesses, but their working capital is in a significantly weaker state. Even with some of the measures announced today, it is likely that we will start to see an increase in insolvencies in the months ahead. »

Kasper Larsen, co-chief executive of fintech platform YouLend, said SMEs suffering from inflation can seek funding from alternative lenders.

Read more: New rise in inflation makes saving cash ‘impossible’

“Just a few months ago, the Federation of Small Businesses declared an SME crisis,” Larsen said.

“Telling SMEs that the path to success is through investing in innovation is all well and good, but while many struggle to keep their lights on, investing requires cash flow support that they simply don’t have access to. currently.

“For SMEs, this type of volatile environment means that it will be absolutely vital to expand their financing options and put cash management measures in place.

“The answer may lie in alternative finance. Having proven itself during the pandemic, offering a lifeline to business owners when government support was too slow, the new world of lending, defined by speed, flexibility and inclusiveness, is here to stay – and could be the answer SMBs were looking for, and didn’t find, in Sunak’s Spring Statement.

Maddy Alexander-Grout, managing director of discount specialists VIP Rewards, welcomed the expansion of R&D and 50% reductions in business rates, but said companies would feel even less confident about the future. .

Read more: Loans to SMEs were “moderate” in the fourth quarter

“Essentially, nothing has been announced for small businesses that aren’t paying tariffs, that need subsidies to help them recover from the pandemic,” she said.

“And employers will feel the pressure on employer contributions. This will leave businesses even less confident about the future.

About Jermaine Chase

Check Also

Note to money lenders – Government proposes to lower usury rate caps by end of 2022

This is an offense under the Money Lenders Ordinance (Cap. 163;”MLO”) to lend or offer …