The Government has done an excellent job of putting the country’s business community into Hibernation, via its Furlough scheme, whereby companies using Government funding, have been able to effectively close their businesses on a temporary basis, whilst paying staff 80% of their salaries up to a maximum of £2,500 per month.
The Government has also enabled high street Banks to issue government-backed loans to companies who can show a profitable track record over the 18 months before the Corona Virus outbreak and has even helped the Self-employed.
The glaring gap is assistance to Start-up businesses.
Steve Endacott, Co-Founder of Rebound Consulting commented, “ I have seen hundreds of start-up business and a common denominator, is that the business plan is often to lose money in the first 2 years whilst they reach critical mass and then make profits from year 3 onwards, with a hockey stick rise in profits thereafter.
My own Holiday Taxis Group followed this path and ended up carrying 7million passengers and being sold successfully, but if it had been started in the last 2 years, I believe the Corona Virus would have bankrupted it.
Start-up’s like most businesses will be using Furlough grants to stagger on for the moment, but once these grants stop many will not have the capital required to relaunch and will quickly fail unless they can raise further funding.
Many private investors will be looking at the predictions of a recession, as bad as the Great Recession of the 1930s and will be hesitant to invest further. Unless the Government reduces their risk by creating a loan fund to match their investments
“Governments by their nature, are not well-positioned to assess the quality of start up’s management team or business plan, likewise banks tend to focus their loan approvals on historic numbers rather than the typical optimism of most start-up business plans, but “Angel” investors who are risking their money in the form of equity investments are”, said Rebounds Will Waggott.
Rebound Consulting is calling on the Government to match investors money with government loans.
Seamus Conlon said “Start-ups will still need to convince private individuals to take the largest risk, with “All or nothing” equity investments, but the Government start-up fund would match this investment, with a loan repayable after 3 years trading, paid off over a further 5 years. This type of long term loan would allow the business to grow in the crucial early years creating wealth and jobs for the country.”
“The government COBIL loans scheme is barely working for existing SMEs, it ignores startups completely”.
“As we come out of Corona Lockdown, many existing businesses are going to reduce in size and the country will see large scale redundancies and a major surge in unemployment. As usual, the youth of the country may suffer the most, as they find themselves competing with the market place full of experienced and newly redundant workers”, said Will Waggott
Steve Endacott commented “Few Entrepreneurs are created at birth, but start their own business because they have a great idea and often have just lost their jobs. Many people will be using the current lockdown period, to flesh out ideas that they have been tinkering with for a while, in preparation for being made redundant.”
Rebound Consulting believes that the Government needs to help harvest these ideas and create conditions for a wave of new start up’s and support the existing start-ups
Rebound Seamus Conlon commented “Travel is one of the sectors that are likely to suffer the most from the Corona Lockdown and the following recession. However, we know we have a bedrock of creative people, who are customer-focused and used to working in relatively risky business. I think we could easily see the next big thing in travel emerging in the next 18 months with the right support and funding”.