- A new report on the success of the COVID-19 support fund states that 27% of businesses that claimed help didn’t need a grant.
- It’s now estimated that £1.1bn was given incorrectly or fraudulently to small businesses.
- Like grants, trade credit insurance supported many businesses throughout the pandemic to protect their cash flow.
During the global pandemic, over a quarter of British small businesses were helped by the COVID-19 support fund. The government had to act fast to limit the effect the pandemic had on the British and global ecomonies.
According to the Department for Business and Trade (DBT), the fund prevented up to 21,000 businesses from closing by the end of 2022, potentially saving the jobs of up to 400,000 people.
Summary
Key Takeaways
Government analysis now shows that many businesses that claimed support could have survived if they had not claimed a grant and around 27% received grants that weren’t needed.
At Allianz Trade, we share the desire to protect your business and to help others. Trade credit insurance was an alternative solution for many during the pandemic and continues to help companies grow today.
Why were COVID-19 grants given?
First introduced in March 2020, the Local Authority COVID-19 Business Support Grants Schemes programme was designed to protect small businesses’ cash flow. It was aimed at companies that relied on social contact and suffered due to the efforts to contain the outbreak.
It was believed that many of these organisations wouldn’t survive without help, which could have led to job losses and long-term unemployment. Therefore, a grant could support them with non-wage costs.
What went wrong with the COVID-19 business grant scheme?
The DBT said:
‘Analysis of the balance sheets of firms receiving grants suggested that only a quarter had financial reserves that would not have allowed them to absorb the costs associated with short-term disruptions in their ability to trade.’
How much money was granted in error?
It’s now estimated that £1.1bn (just under 5% of the grants issued) were given incorrectly or fraudulently to small businesses, primarily in the retail and hospitality industries. 83% of this figure was due to errors in claims, but £20.9m was recovered by May 2023.
How did trade credit insurance support businesses through the pandemic?
During the pandemic, we recommended businesses set up efficient risk management policies and stated:
‘In such a perilous period, trade credit insurance solutions can also offer a reliable protection against potential insolvencies: part of your receivables can be insured and compensated in case of a bad debt.
‘The epidemic has brought the insolvency risk and the issue of delayed payments back to the forefront. […] Protecting your business with good cash flow management is more important than ever to protect your future growth.’
We, of course, recognise the fact businesses needed funds to purchase a trade credit insurance policy, whereas a Local Authority grant was given freely. However, cover, like ours, is data-led and needs-focused providing businesses with an additional level of insight and protection.
Allianz Trade, like the government, seeks to protect businesses from financial distress. Our focus was, and is, on our customers of all sizes and sectors, and this led us to strengthen and enhance our tools during the pandemic:
- We now have smoother policy management with instant online chat, status tracking, pricing caps, and cover history.
- We provide crucial data and instant access to key financial and sector data.
- We give exclusive access to webinars and the latest economic information.
- We offer small businesses, non-payment support and a new product designed to their specific needs.
Allianz Trade continues to protect businesses in a post-pandemic world
Predicting and anticipating future crises isn’t easy. However, preparedness, awareness of political risk, and a trade credit insurance policy can protect your organisation from the worst.
At Allianz Trade, we enable our customers to offer credit terms with confidence by knowing trade receivables are insured for 12 months. So, if an invoice payment is missed due to insolvency, refusal, or inability you’re protected.
We also inform credit risk decisions using powerful data insights to inform who to extend credit to and at what limit.
In short, we give the confidence to grow. To find out more about Allianz Trade and our trade credit insurance, please get in touch.
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Allianz Trade is the global leader in trade credit insurance and credit management, offering tailored solutions to mitigate the risks associated with bad debt, thereby ensuring the financial stability of businesses. Our products and services help companies with risk management, cash flow management, accounts receivables protection, Surety bonds, Business Fraud Insurance, debt collection processes and e-commerce credit insurance ensuring the financial resilience for our client’s businesses. Our expertise in risk mitigation and finance positions us as trusted advisors, enabling businesses aspiring for global success to expand into international markets with confidence.
Our business is built on supporting relationships between people and organisations, relationships that extend across frontiers of all kinds - geographical, financial, industrial, and more. We’re constantly aware that our work has an impact on the communities we serve and that we have a duty to help and support others. At Allianz Trade, we’re strongly committed to fairness for all without discrimination, among our own people and in our many relationships with those outside our business.