By Kristy Dorsey
The Federation of Small Businesses (FSB) has welcomed a pledge of additional banking support as anecdotal evidence suggests Scottish firms are beginning to see the first effects of the coronavirus outbreak.
The Royal Bank of Scotland has said it will provide an additional £350 million in working capital to SMEs north of the border as part of a broader £5 billion UK-wide initiative. The money is being provided as an extension to the Working Capital Support element of the bank’s existing Growth Funding Package, and is intended to help mitigate the impact of any short-term cashflow problems from a downturn in trading.
Royal Bank said it will provide help across all sectors “where there is the greatest disruption and need”.
In addition to the extra funds for working capital, the support package also includes loan repayment packages and temporary emergency loans with no fees.
Colin Borland, head of devolved nations at the FSB, said it was impossible to tell at this point whether the announced measures would be enough to protect otherwise financially sound firms from a potential cashflow crisis.
The eventual scale of the outbreak and its knock-on effects are still unknown. Mr Borland said he had yet to see any concrete evidence of an economic impact linked directly to coronavirus, though there have been some early warning signs.
“We haven’t seen anything specific as yet, but I have heard some anecdotal evidence that in big cities there seems to be a decline in footfall,” he said. “There has also been some talk among accommodation providers of a rise in cancellation rates.”
Last week, the FSB came forward to urge banks and Her Majesty’s Revenue and Customs (HMRC) to show “common sense” in dealing with firms struggling as a direct result of disruption caused by the virus. With that in mind, Mr Borland said this latest announcement from the Royal Bank was “obviously welcome”.
“It is not a lack of profitability that kills businesses, it is a lack of cash” he said. “A little bit of short-term common sense such as this will yield long-term dividends, as these firms will not be lost to the economy forever.”
Malcolm Buchanan, chair of the board at Royal Bank, added: “The impacts our customers may experience will vary from sector to sector, but we want to be proactive in the way we support them and to use our size and scale, combined with our detailed customer and sectoral knowledge, to ensure Scottish SMEs are supported through the impact of coronavirus.
Measures to support cashflow include capital repayment holidays on variable rate lending and the granting or extension of
overdraft limits.
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