At Peak Cashflow, we always like to see the positive in any situation.
But in recent years we understand there’s not been a lot for us to be optimistic about, with the pandemic causing widespread disruption and then just as we’re adapting to our new normal, the cost of living crisis takes hold.
And we’ve seen the exact same issues within businesses.
With the rising costs of food, fuel and energy not to mention inflation and interest rates, it’s hard to know how things could look moving forward.
Hard decisions have had to be made, and cutbacks and money worries have plagued business owners. Instead of looking forward with plans for growth and development, unfortunately for many, it’s been a case of survival over success.
And survival is something most companies have had to learn to deal with at some stage throughout their business lives.
You may remember 2008; it was the year of the deepest UK recession since the second world war.
Lasting for five quarters, the ‘credit crunch’ had a huge, negative impact on UK businesses across the board.
With the UK’s three main industries; retail, financial services and real estate the hardest hit when the lending bubble burst, no sector was safe from the ripple effects of the financial crisis.
And this is where the idea of ‘zombie’ companies really took hold.
If you’ve not heard the phrase before, a zombie company is one that is said to be “neither dead or alive”, just like its namesake.
This name is given to businesses who are in a significant amount of debt, and any funds made are used to cover the interest, but are never enough to reduce the deficit.
Unfortunately, this means that a business in this situation cannot grow, develop, or invest in new staff or assets to move the company forward; therefore, they are just surviving.
And we’re still seeing businesses today dealing with the impacts of the 2008 recession, so the pandemic and its effects could not have arrived at a worse time.
Although, this time, we have seen generous financial packages from the government to ensure businesses can weather the pandemic’s financial storm.
According to statistics, over 73,000 UK businesses received more than £17 billion of financial support from the Coronavirus Business Interruption Loan Scheme (CBILS), as of October 2020.
But of course, with the borrowing of cash comes further issues down the line with repayments, something businesses in ‘survival mode’ rarely consider at the time.
And then came the pressing issue of deferred VAT, which the government had put in place to support businesses throughout the initial pandemic period.
For businesses who decided to defer their VAT between March or June 2020, HMRC initially required the payment to be covered before 31st March 2021.
As this date crept up on businesses, HMRC developed the TTP, or ‘Time To Pay Scheme’, to extend these arrangements, which opened up on the 23rd February until late June. This extension has allowed businesses to free up invaluable cash to survive and thrive throughout the pandemic.
There have also been instances where more proactive businesses are thinking positively about the future, understanding that additional financial support is available to aid growth over the months to come.
A method we are recommending to support SMEs improve their working capital is with invoice factoring.
The rise in costs and shortages of materials off the back of the Ukraine invasion proved to provide further difficulties just as government support was starting to slow. But independent invoice factoring companies, such as Peak Cashflow, have been able to support businesses by taking responsibility for securing and collecting invoice payments from customers.
This effective support improves working capital by providing businesses with access to a certain percentage of the cash owed by customers, before they have paid their outstanding balance.
The cash received can be used to invest in new team members, grow into a new market or product offering, or simply survive during these unprecedented times.
And, depending on your industry, there are also additional financial products available, including asset finance, which can free up capital for high-cost assets that are required to fulfil your business purpose.
With various products and solutions available to SMEs, our advice is simply not to panic; there’s still a chance to find a cure to the ‘zombie’ company apocalypse.
Of course, this is easier said than done, and we can understand why the current situation can be highly overwhelming for a small business.
But, the team at Peak Cashflow are here to help talk you through the process and get you back on the road to cash flow recovery and business growth.
For a free, no obligation, instant quotation and review of the financial solution best suited to your requirements, please click here, or if you’d like to get in touch with our team directly, give us a call on 0121 236 7575 or email us on email@example.com.