Managing Distressed Entrepreneurs During COVID19
22nd June 2020
Since March, Crowd2Fund implemented an emergency action plan to help mitigate the potential damages for both businesses and investors due to COVID19.
This significant effort from the Crowd2Fund team is starting to pay off with almost all distressed business now accessing emergency credit, resolving themselves or in some circumstances, being restructured into a Revenue Loan - a structure that gives businesses more flexibility during periods of low revenue.
Out of a total of 514 business clients, 79 businesses contacted us at the peak of the COVID19 economic crash; all but 10 businesses have been resolved. The businesses that contacted us were directly affected by the government restrictions, mainly in the hospitality sector, beauty, education, health or non-essential shops and businesses that were not able to move their trading online immediately.
Our first plan of attack was to direct businesses to the government grants that were offered quickly after the economic shutdown in mid-march. This gave the platform some time to work with HM Treasury and the British Business Bank to carve out a plan for the 100s of Crowd2Fund businesses who were exposed to the economic shock. Some restructures were also granted early on to businesses in severe difficulty paying fixed-term loans. Moving to Revenue Loans, rather than offering payment holidays, gave businesses a clear structure for them to repay after the lockdown. It also means that at least the minimum interest-only payments are maintained for investors.
Switching the most severely distressed businesses to Revenue Loans allowed investors to earn more in the short-term because more of their capital was deployed for longer, however, the Revenue Loans have been configured in a way that meant the loan term aimed to remain consistent with the original loan schedule. Crowd2Fund also worked with Deloitte to distribute a clear guide for businesses seeking relief capital. Due to the great efforts made by our Crowd2Fund team, 85% of the initial 76 businesses that expressed distress are now back on track. Now we can look to the medium-term plan to launch financial products in order to help entrepreneurs grow and allow investors to continue and potentially earn good returns post lockdown.
We will focus on listing small businesses who have technology at their core and have the capability to scale globally in a post-COVID19 growth sector. The Crowd2Fund credit team are also looking at hybrid debt and equity products in collaboration with HM Government to deliver innovative capital to support business growth.
Crowd2Fund will continue to develop its loan management and monitoring system and business support services to ensure investor earnings are maximised and losses are reduced - critically though it’s about finding the very best businesses to list on the platform for you to invest in.
We are extremely excited about the future and have already started to see a new generation of innovative businesses emerge.
Past performance and forecasts are not reliable indicators of future results. Tax treatment of any of the investment offers will depend on the individual circumstances of each investor and may be subject to change in the future. If you are unsure about any aspect of the information provided by the company, you should seek advice from an independent financial adviser. Do not invest more than you can afford to lose. Investing in start-ups and early-stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Investing in start-ups may expose the individual concerned to a significant risk of losing all of the money or other assets invested. Peer to business lending through Crowd2Fund is not the same as holding a bank or building society savings account. When making a peer to business loan, your capital lent to a borrower is not covered for compensation in the event of a loss by the Financial Services Compensation Scheme. It may prove impossible to recover all or part of the loan by calling in the business assets held as security on that loan. Reward and Donation funding types are not regulated by the Financial Conduct Authority Crowd2Fund Limited is authorised and regulated by the Financial Conduct Authority (FRN 623683). Crowd2Fund Limited is registered in England and Wales. Registered No. 08472687 Registered Address: 242 Acklam Road, London, W10 5JJ.
Past performance and forecasts are not reliable indicators of future results. Your capital invested is not covered for compensation in the event of a loss by the FSCS. Tax treatment will depend on the individual circumstances and may be subject to change. Please see our Risk section before making an investment decision.