Reward Finance Group director Nick Smith says the company will open its doors to help Carillion suppliers under threat due to cash flow problems caused by the construction giant’s collapse.
The Leeds and Manchester-based alternative finance provider has pledged financial support after Cabinet office minister, David Lidington, warned that companies subcontracted to work on private sector deals will have government support withdrawn today. This could affect up to 30,000 firms owed money by Carillion.
Mike Cherry, head of the Federation of Small Businesses, says Carillion had already extended its payment terms to 120 days and, now that it has gone bust, its creditors will be “at the back of the queue for payment”.
And there is more bad news from trade body Build UK which points out that “in the past, when other big contractors have failed, around 18% of businesses who were creditors did not survive the next five years".
Rudi Klein, head of Specialist Engineering Contractor, an umbrella group representing suppliers to the construction industry, says the supply chain is going to bear the biggest loss, leading to a large number of companies experiencing substantial financial distress. And Smith said:
“Many of Carillion’s suppliers will be having sleepless nights following this week’s announcement and will be drawing up survival plans to protect the company and employees.
“Most would not have expected or planned for a bad debt from an organisation such as Carillion, which would have been seen as rock solid especially as it had so many high profile Government contracts.
“Although it will have a huge impact on cash flow there may be an opportunity for some firms to trade through with an injection of short term capital. However with high street banks taking an age to actually make funds available, this may not be seen as a viable option.
“Reward’s specialism is to provide funding to trading businesses in timescales that banks are incapable of achieving. We have pledged therefore to do all we can to help those companies affected by the collapse which can demonstrate that, with the help of short term finance, they can trade through this extremely difficult period.
“With a recent investment of an additional £40m worth of funds, Reward are keen to help businesses stabilise themselves as well as grow.”