September 30, 2020

We Ask an Industry Veteran How Covid-19 Is Really Affecting UK Businesses


Graeme Lipman has decades of SME experience. First through running his own firm in the printing and publishing business, with a multi-million pound turnover and over 50 staff, and now as a director at Begbies Traynor, assessing SMEs through independent business reviews for banks and other financial clients.

Through these reviews, Graeme has looked in depth at hundreds of SMEs and is an expert at spotting the warning signs when businesses are in trouble. We spoke to him to get his view on how Covid-19 is really affecting UK businesses and what to expect.

Why are SMEs particularly vulnerable to the impact of Covid-19?

Even in good times, SMEs often operate on fragile margins and are at risk of falling into trouble. Especially at the smaller end, there can be a lack of financial expertise.

This lack of expertise means that they find it difficult to make reliable and up-to-date projections. Without good forward planning, SMEs are very vulnerable to even small changes in fortune. Companies need to be planning for the worst, but we often see business owners being far too optimistic.

Poor or even no management accounts are something we see regularly and can be a warning sign. This lack of oversight may not cause problems when things are going well, but in the current climate it can mean issues aren’t addressed soon enough.

Can you give us an example?

Recently, I’ve been working with a chain of gyms who have run into trouble. They lost a lot of income over lockdown when the gyms were closed, and even now they are reopening they’re seeing far fewer people return. The management has made a plan that looks great, but it’s too optimistic: they are looking at a 10% fall in memberships, but what if the decline is more significant? The plan doesn’t have a strategy for a more substantial fall in membership levels.

This is typical of what we see from many struggling SMEs: the contingencies in place aren’t detailed enough. This coupled with a lack of dynamic forecasting means that when things don’t go well, there is no clear plan to recover.

Another example can be seen with the end of the furlough scheme. There will be firms that can’t afford to keep staff on when the scheme ends in October. But making staff redundant can be very expensive, and for companies it will be a lump sum that will apply considerable cash pressure. Again, SMEs need to be planning for this in their projections but many are not.

How have you been able to help?

We don’t expect SMEs to be making huge profits or sitting on large balance sheets. However, it’s important for owners and managers to know what their options are if things do start to go wrong so that risks can be mitigated as soon as possible.

Before working with us, the gym chain didn’t know what its options were. Now they are planning for what happens if a worst-case scenario does occur and putting contingencies in place. They know their options if they were to become insolvent, and have looked into what restructuring or refinancing would mean for them.

What would you recommend to SMEs who want to plan better for the future?

The reality is that often the financial skills required to make useful and accurate projections (and therefore plans) aren’t there. This leads to even more uncertainty in the market when things go wrong.

For an SME to make it through downturns and times of uncertainty, management need to make the time to upskill themselves in these areas and make sure they know their figures inside out. My advice would be:

  • Stress test your projections regularly to ensure you’re prepared for a wide range of eventualities.
  • Start using dynamic budgeting so that you can operate flexibly, and adjust your approach if activity isn’t what you predicted.
  • Keep a constant review of your debtors and creditors. Make sure you notice who is taking longer to pay you, figure out why, and see how you can address the situation.
  • Invest time in building a management information dashboard that will allow you to see all of this key information on daily, weekly or monthly basis.
  • Know your options for worst-case scenarios.

By having these skills and maximising the information available, business owners can minimise uncertainty and plan better for the future.

What does all this mean for lending?

Lenders are going to be concerned about lending to SMEs in the coming months, especially to those who can’t paint a clear picture of how their business is going to remain profitable. There’s going to be an increase in pressures on firms’ cashflows, as tax and rent bills need to be paid again. If there is also poor management oversight, lenders are going to be reluctant to invest.

Lenders will be reviewing financial information and accounts in a lot of detail, including through more independent business reviews. This means they are going to be more cautious than ever, and some may reduce lending significantly.

What’s your advice for brokers?

Lenders still have money to lend—they are just going to be more careful where they put it. So if you’re a commercial finance broker looking to secure funding for a client, you need to make sure that you can clearly articulate their business plan and demonstrate that the management knows what it is doing. You need to be able to show lenders that the contingencies and reserves are in place, and that the assets the firm has will retain value.

Using past performance and past asset prices won’t be as useful as previously: you’ll need to get into the mindset of the business more and demonstrate that their forward-looking business plan is robust and reliable.

With the recent lockdown measures and uncertainty around the potency of the second wave, lenders will want to see that companies have planned for a bleak winter—even those that have recovered well from the first lockdown.


At Reparo, our approach has always been to look at the business case of each firm individually, rather than strict lending criteria. By exercising caution and using our expertise, we can help clients access an appropriate level of funding.

To discuss a loan please get in touch on or 0161 451 5710