UK businesses, including self-employed freelancers and contractors, can expect to wait twice as long for payment for new work carried out as £133bn backlog of payments piles up since March.
March 2020 will go down as the month for many freelancers and small-to-medium business owners as the month when everything started to crumble. Since that fateful month, nine in ten businesses are waiting to be paid an average of £148,917 for work done pre-lockdown, according to a MarketFinance report. That equates to about £133bn based on 891,000 businesses or 90% of companies that match survey criteria declaring monies outstanding since 20th March 2020.
Half of some 2,000UK companies surveyed that employ between 1 and 249 staff with a minimum turnover of £100,000 anticipate waiting anywhere between 14-30 days beyond normal terms (45 days) for payments. But some are in a far worse position with 15% reporting that they could be waiting anywhere between 3-6 months longer than pre-lockdown conditions to be paid for work carried out.
This has led to some painful decisions about their workforce. A quarter of furloughed workers are likely to be made redundant in September 2020, according to those businesses surveyed.
Another kick in the teeth is the fact that half of those that applied for CBILS loans have been declined and cash flow will be strained as invoices take longer to be settled, according to fintech lender MarketFinance, which does provide CBILS loans, based on certain criteria.
The typical loan taken by these businesses was £211,667, though they applied for almost double this amount.
Anil Stocker, CEO at MarketFinance, likens the situation as a “three-pronged assault” on SME finances.
“First up, its alarming that only half of their CBILS loans are being granted, then we learn that they have close to £150k in outstanding payments since the lockdown began and now, it’s likely that they will have to wait twice as long to get paid for new work they do whilst demand and economic activity normalises.”
Longer term, business owners have revised down their expectations of when they anticipate things to return to normal. In March, the majority (56%) felt business would normalise by September 2020. However, now the majority (57%) feel it could take as long as one to two years to normalise and are planning accordingly.