Coronavirus forcing 40% of SMEs to halt plans to sell
Coronavirus is forcing 40% of SMEs to delay their plans to sell, according to data collected by Nucleus Commercial Finance.
Prior to the pandemic, 35% of SMEs had intended to sell their business over the next two years.
Of those looking to sell, 25% have put their plans on hold due to coronavirus having a negative impact on their finances, while 21% have stalled because the value of their business has fallen.
In contrast, 20% of SMEs have paused the sale as their business as it is now preforming better than it was prior to the coronavirus pandemic.
Furthermore, 68% of SME owners intend to still be involved in the business after they have completed the sale.
The data shows that 23% of SME owners are willing to sell to a competitor and remain at the business, while 13% plan to sell to a family member and continue involvement.
Meanwhile, 31% plan to have no involvement post sale.
Looking to those intending to pause the sale of their business, the average delay is 17 months.
The principal method to fund this investment at 70%, is to use external finance, while 33% plan on taking out a loan with an alternative lender, and 20% intend to use a loan from a bank.
The top three reasons for taking out external finance include product development at 48%, making new hires at 44%, and investing in new technology at 33%.
Chirag Shah, chief executive at Nucleus Commercial Finance, said: “SME owners across the country have faced their toughest few months since the global financial crash.
“Not only has COVID-19 significantly impacted the day-to-day operations of their business, but now with increased market uncertainty, many business owners have been forced to re-evaluate future sale plans.
“Reaching a point of sale is a huge milestone for any business owner, requiring both sheer determination and time. As such, the delay to this process is a big emotional burden, in addition to the on-going financial and operational challenges they are already facing.
“Looking ahead, business owners need to think carefully about their strategy, and, crucially, how to reach a point of sale again.
“This, however, isn’t something they need to go at alone as there is help at hand. Whether it be to develop new products, hire more staff, or invest in new technology, the alternative finance industry can play a big part in supporting businesses to reach their goals and navigate through this challenging environment.”