Credit, Collections & Insolvency News
The Covid pandemic was by and large a catastrophe for many SMEs (small & medium-sized enterprises), with business owners seeing trading suffer due to restrictions, financial uncertainty, and major changes to consumer behaviour.
Yet amid all the difficulties, I have seen some silver linings. I see directors, lenders, suppliers, and landlords taking a more holistic approach to business whereby they appreciate the risks their counterparts are taking, and, due to the fear of insolvency – which is often a lose/lose situation – have acted with more patience, empathy, and forebearance than they might have done when faced with struggling businesses before the pandemic.
What’s more, this forgiving approach is often in creditors’ best interests. Consider landlords: A tenant who can only pay half of their rent is better than no tenant at all as that would mean the landlord would become responsible for the property’s rates and taxes, with, perhaps, limited prospects of renting out to a new tenant. A new tenant is also likely to request a large rent free period in return for signing a lease for a significant period of time. With this mindset, it is easy to choose an approach that includes deferred terms instead of aggression.
I recently helped a client, who was struggling to pay, reach out to their landlord, admitting to their hardships. Due to this openness, the landlord came to understand that having the rent paid in full and on time would be a challenge in the short term, but that the business’s long-term prospects were still strong. Therefore the landlord went ahead and signed a deal giving the client a length of respite that would have previously been unimaginable.
I have also seen banks and HMRC take a more patient approach with companies as we continue to emerge from the pandemic, offering longer payment plans while they ride out the difficult phase of building momentum.
It is too early to know if the business landscape has been forever changed by the pandemic and the economic turmoil it wrought. The UK SME sector is still emerging from it and adapting to the new normal. Nevertheless, it is gratifying to see that business owners, lenders, suppliers, landlords, and HMRC are working in a collaborative way for the long-term viability and stability of the UK economy. I look forward to seeing how things develop.
