Already cash strapped SMEs across the country will be (up to) £20bn out of pocket when the first round of salaries are paid to the 8 million people currently furloughed through the Coronavirus Job Retention Scheme (CJRS), according to MarketFinance. Businesses must pay staff and then reclaim the money from HM Revenue and Customs (HMRC) online starting this week. However, firms are not expected to start receiving rebates until at least the end of April, and maybe even longer.

“The furlough scheme is most helpful, but timing and speed of payments is key,” commented Emma Loisel, chair and co-founder of coffee wholesalers Volcano Coffee Works. “Even though 90% of our customers have closed, most of our business operating costs continue. We are monitoring our cash flow on a daily basis. Employees are a big part of our costs. We furloughed two thirds of our team in March, so we have already paid upfront for furloughed staff last month. Now we will pay another month before being reimbursed by the Government. This  is causing a huge dent in our cash flow and makes it hard to focus on everything else we need to do to ensure the business gets through this.”

Fintech lender MarketFinance says it has stepped in to help SMEs bridge the gap between paying furloughed staff and waiting for their CJRS claim to be paid by HMRC. An invoice finance solutions provider, the fintech has pivoted its model to provide funding against HMRC payroll rebates. Where invoice finance has up until now seen businesses advanced money owed to them in outstanding invoices, MarketFinance will now offer the same cash flow solution to SMEs looking to advance funds owed in CJRS claims. Businesses will initially be able to apply for funding facilities up to £150,000.

“With April’s payday looming, it is essential that the HMRC application process is smooth and that payments are made as soon as possible,” said Anil Stocker, CEO at MarketFinance. “Any delay would exacerbate the cash crisis many companies are facing and could threaten jobs and the survival of these businesses. We’ve been advancing cash to businesses since 2011 against invoices with long payment terms. We have perfected this model over the years and, now, in less than 48 hours have quickly adapted our model to meet the current needs of business. These vulnerable businesses, already very short on cash in the bank, will face yet another pressure by having to pay salaries for furloughed employees and then reclaim it days later.”

“If you think of the maths at the most basic level, business owners have received less that £2bn from the CBILS scheme and yet they are likely to be out of pocket by £20bn for days by HMRC which is inevitably leading to massive cash challenges,” added Rashesh Joshi, managing director at Alexander Rosse Chartered Accountants. “Something is not quite right here. Moreover, it is unknown if HMRC will be able to provide these funds on time, stressing the cash position of businesses and challenging one of the key objectives of this policy: the protection of business activity and employment.”