According to the results, the government’s plans to ease lockdown restrictions have earned a surge in optimism from small businesses, with 74% expecting demand to hit pre-pandemic levels by Christmas.

Additional results from the survey suggest that nearly a third (29%) of the UK’s six million SMEs are planning on increasing their workforce. Whereas, 61% plan to dedicate a portion of investment to staff training and development (39%).

Jonathan Andrew (pictured above), global chief executive officer of BFS, said: “The UK’s SMEs have had an incredibly difficult year, and it’s fantastic to see that the vast majority are optimistic for the year ahead. It’s hard to predict what the long-term impact of the pandemic on the UK economy will be and it’s unlikely that it will become clear for some time yet. However, as demand begins to return to normal and SMEs look to meet it, cashflow is going to be key.”

35-60% likely to default on loans

However, despite the positive outlook, small businesses are still owed an average of £116,376, representing a huge working capital gap. This is particularly damaging when some 26% state that they need cashflow support more than ever.

This has led to 39% of SMEs having not yet considered, or being unsure of, how they will repay the government-backed loans when the time comes. Only 55% of SMEs stated that they were able to repay the loans via company profits.

Additional statistics from the National Audit Office, the Department for Business, Energy & Industrial Strategy and the British Business Bank suggested that 35-60% of borrowers were likely to default on these repayments.

£300 million of funds incoming

In an effort to drive growth across the UK economy, BFS has also launched a £300 million Pandemic Recovery Fund for both new and existing SME clients.

Available through BFS’s invoice finance products, the fund is targeted at SMEs trading on credit terms with other businesses, supporting supply chains and those looking to access funding to drive growth.

Ian Ramsden (pictured above), UK chief executive officer of BFS, said: “We know the tremendous impact the pandemic has had on SMEs and supply chains across the UK over the past year. However, with the vaccine roll-out underway and the government’s four-step ‘road out of lockdown’ plan underway, there is some light at the end of the tunnel for the economy.

“Now is the time for SMEs to plan ahead so they have sustainable funding in place to enable them to increase stock levels, rehire staff, and take on new business as customer demand starts to return throughout the spring and summer months.”

Founded in 1982, BFS is an independent financial services firm that works with more than 9,000 businesses worldwide. The lender offers a range of trade, asset and working capital finance solutions as well as FX and insurance services. During the pandemic, the company funded more than £6 billion of SME turnover in 2020.

BFS estimates that the fund will be divided as follows:

• 20% to support manufacturing businesses;
• 15% to support services;
• 15% to support construction;
• 10% to support transport;
• 10% to recruitment SMEs;
• 30% to businesses suitable for invoice finance in all other sectors.

Ramsden added: “While undoubtedly government loans have been a lifeline for many businesses, SMEs should start to consider more sustainable sources of funding to coincide with the rebound of demand. We support the recovery loan scheme as we supported CBILS, but this fund will allow us to provide funding to a wider range of businesses as they position for growth.

“We’re proud of the support we have provided to the national and regional economies over the past 40 years. Our Pandemic Recovery fund demonstrates our ongoing commitment to UK SMEs, our support to recovery over the coming months.”