Organisations across the country up to £20bn out of pocket as they pay the first round of wages to the eight million employees furloughed so far.
Fintech business lender MarketFinance has repurposed its invoice finance solution to provide cash flow to small and medium enterprises (SMEs) waiting for payroll funds from HM Revenue and Customs (HMRC).
The Coronavirus Job Retention Scheme (CJRS) is open for businesses to reclaim 80% of furloughed employees’ pay from this week, but organisations are not expected to start receiving rebates until the end of April.
In addition, businesses must pay staff and then reclaim the money from HMRC, which MarketFinance pointed out could leave organisations across the country up to £20bn out of pocket in the meantime as they pay the first round of wages to the eight million employees furloughed so far.
Through MarketFinance’s repurposed cash flow system, which was originally introduced to provide advanced money owed in outstanding invoices, businesses will be able to a apply for funding facilities up to £150,000.
Anil Stocker, CEO at MarketFinance, said: “With April's payday looming, it is essential that the HMRC application process is smooth and that payments are made as soon as possible.
“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.”
Rashesh Joshi, managing director at Alexander Rosse Chartered Accountants, added: “If you think of the maths at the most basic level, business owners have received less [than] £2bn from the [Coronavirus Business Interruption Loan Scheme (CBILS)] and yet they are likely to be out of pocket by £20bn for days by HMRC, which is inevitably leading to massive cash challenges.
“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.
Emma Loisel, chair and co-founder of coffee wholesalers Volcano Coffee Works, said: “The furlough scheme is most helpful, but timing and speed of payments is key.
“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.”
