By John Rozenbroek, CFO/COO at Capify (www.capify.co.uk)
Care home workers have been at the forefront of the battle against coronavirus, and the sector has faced incredible challenges throughout this pandemic.
As the world struggled to control the spread of the virus, care homes were amongst the worst hit and had to prioritise protecting resident’s health above all else. Now, as we begin to emerge from the devastating impacts of COVID-19 we are beginning to see the true financial impact this has had on the sector.
Reduced revenue due to a drop in the number of residents; an increased need for workers; high staff turnover and the additional cost of PPE and other safety measures within care homes has had a significant impact on cash flow for these businesses.
Care England estimated that the cost for adequate PPE during the coronavirus outbreak to be a huge £253 per care home resident, per week. This is an enormous increase on pre-pandemic costs, which were reported to be around £4 per resident, per week.
The pandemic has highlighted just how crucial care homes are and the important role they play in supporting our loved ones at the end of their lives. However, there are fears now that without further financial sup- port, the sector will suffer, and so will the level of care residents have access to.
We recently completed a survey of SME owners – many of which are in the care sector – and 43 per cent of businesses believed the support offered by the government throughout the pandemic has not been good enough.
On top of that, our survey showed that more than 80% were still looking for finance to support them, despite the many different support schemes that have been introduced.
As lockdown restrictions continue to ease and the country starts to reopen, do care homes really have everything they need to recover from this crisis?
THE NEED FOR GOVERNMENT SUPPORT
Unlike NHS-run hospitals, care homes are often privately owned businesses and therefore their revenue comes from patient fees. In an effort to help the sector in its recovery, the Government announced additional financial support for care homes, including a £600 million adult social care infection control fund. However, this funding was distributed across local authorities and deployed at their discretion, and therefore wasn’t readily available to every care home business.
However, as of March 2021 the government had lent over £76 billion to businesses, including many health and social work companies, through its four main financial loans schemes; Bounce Back Loan Scheme (BBLS) Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Larger Business Interruption Loan Scheme (CLBILS) and the Future Fund.
The statistics show that the government’s BBLS has now provided more than £46bn in funding to more than 1.5m businesses, while the CBILS has lent more than £24bn to almost 100,000 businesses.
According to a House of Commons report, health and social work businesses made up four per cent of the total loan value of both the CBILS and BBLS, totalling more than £2.3bn provided to more than 60,000 businesses across the UK.
The figures are huge, and although it was announced earlier this year that the new ‘Pay as You Grow’ scheme would give businesses with a Bounce Back Loan more time to repay their loans if they need it, the problem is much bigger than that.
Businesses we speak to have either accessed the schemes already and now need a second injection of capital, or they were not able to access the scheme in the first place, so are facing the challenge of determining what they can do now.
For many businesses that did access the schemes, we know that money has already been used to help them through what was a hugely challenging period, so very little if any has been carried forward to look at future growth or investment.
Boosting cash flow was the top priority for 57% of businesses in our survey, proving there is still huge demand for working capital. For adult care homes having working capital to ensure high-quality care can be given to all residents and that they have the staff needed to deliver this is absolutely key. Cash in the bank is a necessity.
On top of all of this, the pandemic has put enormous pressure on workers within the care sector and as a result, many businesses have experienced high staff turnover and sickness, leading to a shortage of key skills. The State of Health Care and Adult Social Care report gives an indication of the toll the pandemic has had on the social care workforce with 7.5% of working days lost to staff sickness, compared with 2.7% pre-COVID-19. We know that there’s a huge amount of resilience and determination amongst the UK’s small businesses, which really are the backbone of the UK economy.
But it’s clear that SMEs, and especially those within the care sector are still in desperate need of finance this year despite the huge amounts of money that have been lent through the BBLS and CBILS. The Pay as You Grow scheme will provide some welcome relief for many businesses, but it does not address the fundamental issue, which is that SMEs still need finance.
THE ROLE OF TRADITIONAL BANKS
Traditional banks continue to make it difficult for SMEs to get the finance they so desperately need to get back on their feet properly, which I believe means that alternative lenders like ourselves will have a crucial role to play in the months that lie ahead. We’re seeing increasing demand from SMEs across the care sector, where we have a strong customer base already, as well as lots of other industries, which is linked to the £50m Small Business Fund we created to help businesses get moving again.
The majority of the UK’s ‘big banks’ are much happier lending to larger businesses with a long track record of profitability. But that doesn’t help SMEs and the impacts of the pandemic will have damaged the chances of many smaller businesses getting finance from a big bank.
That’s where I think the fintech industry will need to step up more than ever before to help companies bridge the gap. There’s already been huge growth with more and more business owners looking to get finance more quickly; with a simpler approach and with more flexibility. For these reasons, I expect 2021 will be a big year for alternative lenders with the support for the care sector set to be high on the agenda.