Nearly a fifth of small and medium-sized businesses will not be able to access the cash they need to get them through the next four weeks, a network of UK accountants has warned.

Despite unprecedented government support, including a treasury-backed loan scheme, research suggests that between 800,000 and a million firms could permanently close this month.

Small and medium sized businesses that are struggling should be able to access cash through the Coronavirus Business Interruption Loan scheme. But many SMEs have reportedly been refused these emergency loans of up to £5 million.

This loan scheme is run through the government-owned British Business Bank, which will also make a Business Interruption payment to cover the first 12 months of interest payments and any lender-levied fees. But the loans will be delivered through a set of approved banks, including high street lenders.

Some of these banks have refused loan applications, saying that they are following rules set out by the government.

When the Chancellor announced the loan support package, he said that “any good business in financial difficult who needs access to cash to pay their rent, the salaries of their employees, pay suppliers or purchase stock, will be able to access a government-backed loan, on attractive terms.”

But many business owners have found it difficult getting through to the banks and when they do, many have been told that they are ineligible.

Many banks are also reportedly asking business directors to sign personal guarantees on some loans. This means if the loan goes bad due to a prolonged shutdown, the director’s personal property would be at risk.

Business owners’ primary residences are protected under this loan scheme, but other personal assets can be recovered by the lender if the company doesn’t keep up with repayments.

Speaking on BBC Radio 5 Live, Mayor of London Sadiq Khan said that banks have got to ‘step up’ to help small and medium-sized businesses during the coronavirus pandemic.

A network of accountants serving more than 12,000 small and medium-sized firms across the country identified that 18% of their clients were unlikely to get access to the cash that they will need to survive a four-week lockdown.

Their findings echo similar reports from other business groups, estimating that up to a fifth of businesses could close if the lockdown lasts a month or more.

In addition to the business interruption loan scheme, the government has announced a broader package of support including income support schemes for employees and self-employed workers. Learn more about the government support.

Want to understand more about the options available to your company if experiencing financial distress? Speak to a member of the team today. Call 01625 544 677