Earlier today, the Bank of England became the latest central bank to make an emergency interest rate cut in an attempt to offset the worsening global economic outlook and stimulate the economy. The news follows a number of UK based high street banks indicating they are prepared to defer mortgage and loan repayments for residential customers and businesses financially affected by the coronavirus outbreak.
With rate cuts having little impact on increasing business revenue during this time of reduced commercial demand, a debt holiday is likely to have more tangible results for struggling households or companies.
However, while any support for debtors has been broadly welcomed, Steve Nico Williams, the CEO of blockchain-based invoice factoring service Populous, has previously suggested that many small and medium sized enterprises (SMEs) will require more assistance than delaying bills.
Small and medium business all over the world will be effected by this virus’s rapid growth. Unlike the big businesses that can withstand the decline in revenue and also afford to keep employees at home and still pay them. SME’s will not stand a chance and will seek funding
— Steve Nico Williams (@iamstevenico) March 9, 2020
With invoice settlement deadlines in some cases already stretched to many months, Williams can foresee cashflow becoming even more problematic the longer the health crisis persists.
Launched in an initial coin offering (ICO) in 2017 Populous’ platform enables SMEs to access funding by selling their outstanding company invoices to investors at a discounted rate.
Such an avenue of financing may become vital for as Celine Hartmanshenn, Global Head of Risk at Stenn Group, outlined to London Loves Business, central bank rate cuts help stock market activity “…but the real economy isn’t the stock market.”
Hartmanshenn believes indebted companies “…will be unable to access further loans from banks, as they’ll be looking at ratios of balance sheets… These companies will now need to look to private lenders and alternative finance providers.”
If the present business environment continues, companies such as Populous will likely become increasingly relevant for as Hartmanshenn concludes, “The measures put forward by the world’s bankers can’t keep workers from getting sick or factories closing.”