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Help for your business’s cashflow and working capital during Coronavirus

Businesses are naturally very concerned about the impact Covid-19 will have on cashflow. Delays and disruptions to supply chains will challenge stock availability and could increase prices causing a potential need to seek alternative suppliers. If this is the case, a new supplier may require advance payment or bank guarantees causing strain on working capital. 

Trade loans and asset financing could provide alternative options for businesses looking to secure funds without having to dig into savings or working capital.

Additionally, the Chancellor has set out a number of new measures which are designed to try and free up access to cash for businesses. 

Coronavirus Business Interruption Loan Scheme

Among the most significant announcements is the introduction of a new Coronavirus Business Interruption Loan Scheme. These loans will be delivered and supplied by the British Business Bank. 

The government will not charge bankers or lenders to provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) for loans up to £5 million in value, so that lenders can continue to provide finance to small and medium businesses. The first 12 months of the finance can be accessed interest free, because the government has pledged that it will cover the first 12 months of interest payments. If you would like more guidance on how this scheme can be accessed, or if you have any more specific questions, please contact our employment solicitors for assistance.

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme means that a business of any size in the private or charitable sector can apply to HMRC for up to 80% of a workers wages to be paid by the government (up to a maximum of £2500 per month which amounts to around £30,000 per year being the current UK median salary).

Statutory Sick Pay relief package for SMEs

For firms with fewer than 250 employees, the cost of providing 14 days of statutory sick pay per employee will be refunded by the government in full. This is likely to provide two million businesses with up to £2bn to cover the costs of large-scale sick leave. 

For more information on employment law in relation to the Coronavirus pandemic read our article: Coronavirus advice for employers: SSP, self-isolation & government support.

Small business grant funding

A grant of £10,000 will be provided for all businesses in receipt of small business rate relief or rural rate relief.

Bounce back loans for small businesses

The government announced the launch of bounce back loans on 27 April 2020. Aimed at SMEs, the scheme will provide loans from £2,000 up to £50,000 helping to give small businesses the cash injection they need in a matter of days, given current circumstances. It will be 100% backed by the government and there will be no interest, fees or repayments to pay for the first 12 months. Plus, the government will be working with lenders to ensure that a low rate of interest is agreed for the remaining period of the loan.

You will not be able to apply for a bounce back loan if you are already claiming financial assistance from the Coronavirus Business Interruption Loan Scheme.

This scheme is now live and taking applications for loans. For more information on the eligibility requirements or to find a lender and make an application, visit the dedicated government web page.

Further Small Business Grants

The government has announced further funding of up to £617 million in grants for small businesses that would meet the criteria for small business rates relief. This latest form of financial support for small businesses is set to support those “businesses in shared spaces, regular market traders, small charity properties, and bed and breakfasts that pay council tax instead of business rates”. The announcement comes as many businesses of this kind found themselves ineligible for the Coronavirus Business Rates Grant Scheme, because they do not directly pay business rates. There will be three levels of the grant available which will range from £10,000 to £25,000. To qualify for the new scheme, you should have under 50 employees and you will need to provide evidence that your business has seen a significant decrease in income due to lockdown measures. The government is set to release more information on how to apply for the scheme in due course.

Future Fund for start-ups and scale-ups

A new scheme was announced on the 20 April to provide equity-based funding through a 500m British Business Bank program called the Future Fund. Start-ups and scale-ups can access between £125,000 and £5m but to be eligible, must have raised at least £250,000 in equity investment from third party investors in the last five years.

The program will offer funds as convertible loans, which will convert to equity if not repaid after a maximum 36-month term.

The scheme will initially open in May, and close at the end of September, although exact dates are still to be confirmed.

Visit the gov.uk website for eligibility criteria and headline terms.

R&D support through Innovate UK

A total of £750m will be available through Innovate UK’s grant and loan scheme to support innovative businesses with additional liquidity.

Up to £200m of grant and loan payments for existing Innovate UK customers will be accelerated on an opt-in basis.

An additional £550m will also be made available to increase support for existing customers, and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding.

12-month business rates holiday for retail, hospitality and leisure businesses

In England, these industries who are likely to be hit hardest by the coronavirus pandemic are to be given a business rate holiday, which will be automatically applied to council tax bills in April 2020.

The Retail and Hospitality Grant Scheme

This provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property. If businesses have a rateable value of under £15,000, they will receive a grant of £10,000 and businesses with a rateable value of between £15,001 and £51,000 will receive a grant of £25,000.

Covid-19 Corporate Financing Facility

Larger companies can apply for support if there is a short-term funding problem, as the Bank of England will buy short term debt from larger companies, which will support corporate finance markets overall and make credit more readily available to all businesses.

VAT and Income Tax payments delay

The government will support businesses by deferring Valued Added Tax (VAT) payments for three months until the end of June 2020. If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

HMRC Time To Pay Scheme

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. If you have missed a tax payment or you might miss your next payment due to COVID-19 you should contact HMRC to see if you can qualify under this scheme.

Help for the Self-Employed

After much speculation, Chancellor Rishi Sunak finally announced a package of measures to buoy up the UK's five million self-employed during the coronavirus crisis. On 26 March, he unveiled an income support scheme that will replace up to 80% of monthly earnings for many self-employed individuals.

To be eligible for the Self-employment Income Support Scheme, worth up to £2,500 a month, you should:            

  • Have been trading as a self-employed individual or member of a partnership for at least three years
  • Earn the majority of your income through self-employment
  • Not earn over £50,000 in trading profits
  • Have submitted a tax return for the year tax year 2018/19
  • Have lost profits due to COVID-19 and intend to continue trading

HMRC will base your income support payment on an average of your last three years of trading profit. You don’t have to do anything yet to apply for the scheme. If you’re eligible, HMRC will contact you, you’ll fill out a short form and they will pay the grant into your bank account. The scheme will last for three months in the first instance and payments are expected in June.

Visit gov.uk to find out more about the scheme.

Further resources

To see a full list of those measures and how they might be able to help you and your business visit the government website.

There is now a dedicated HMRC helpline – 0800 0159 559 – which has been set up to help businesses and self-employed individuals in financial distress and those with outstanding tax liabilities will receive support with their tax affairs. Through this, businesses may be able to agree a bespoke time to pay arrangement which may help them to free up vital reserves. 

The government’s coronavirus action plan provides detailed information about the national response. 

A number of private lenders are also making funds available to small businesses impacted by COVID-19, including £2 bn from Lloyds and £5bn from Natwest

To provide you with additional support during this time we have created a dedicated quick response team to prioritise COVID-19 issues and developed a hub for business legal advice to share resources as the situation unfolds. Contact us directly and our client services team will coordinate your legal support.


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