Keith Tully, partner at Real Business Rescue (RBR), discusses what support is currently available to businesses during the coronavirus pandemic and what can be done to help their financial recovery after the immediate crisis
The UK government has put in place a broad package of measures to help businesses deal with the devastating financial impact of coronavirus. Wage subsidies and government-backed loans are just two of the initiatives introduced to alleviate pressure on businesses currently unable to trade as normal.
So what help is available now, and what can businesses do to help their recovery after the immediate crisis has passed?
Government-backed loans of up to £5 million are being made available to SMEs. The government is guaranteeing 80% of the amount borrowed to encourage lenders to sanction this vital finance, as well as paying the first 12 months’ interest and lenders’ fees. Banks are not allowed to request directors to sign a personal guarantee for loans taken out under this scheme.
- SMEs with an annual turnover of up to £45 million may be able to access funding through the Coronavirus Business Interruption Loan Scheme (CBILS)
- Funding is available from 40 accredited lenders, and businesses need to approach the lender directly to apply.
Larger corporates may instead be eligible for the COVID Corporate Finance Facility (CCFF) where funding is raised through the issuing of commercial paper.
Support for employers
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme allows employers to recover 80% of an employee’s salary whilst the employee is ‘furloughed’ – a hugely important financial lifeline during the pandemic.
When staff are furloughed it means they take a leave of absence and are not allowed to carry out work for the business. Payments are capped at £2,500 per month per employee, plus the employer’s National Insurance contributions and minimum employer pension contributions under automatic enrolment.
Reclaim Statutory Sick Pay (SSP)
Statutory Sick Pay can now be claimed by employees from the first day of sickness. Under the Coronavirus Statutory Sick Pay Rebate Scheme, employers with fewer than 250 staff on the payroll as at 28th February 2020 can reclaim the first 14 days’ of SSP payments of eligible employees. HMRC will announce how to claim the rebate when access to the scheme is available.
Deferment of tax payments
Businesses can defer VAT payments due between 20th March and 30th June until 31st March 2021, although VAT returns still need to be filed.
The second payment on account of self-assessment tax can be deferred from 31st July 2020 to 31st January 2021.
Local authorities in England are to receive funding for two business support grants, and will contact eligible businesses when this is available:
Small Business Grant Fund (SBGF)
For eligible businesses in England that receive Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR), a grant of £10,000 is available to help them cope with the economic effects of coronavirus.
The Retail, Hospitality and Leisure Grant Fund (RHLGF)
This offers grants to eligible businesses in England in the retail, hospitality and leisure industry:
- £10,000 for businesses operating from property with a rateable value of £15,000 or less
- £25,000 for businesses operating from property with a rateable value of £15,001 to £51,000
Business rates relief
Retail, hospitality and leisure businesses and eligible OFSTED Early Years registered nursery businesses in England are also exempt from paying business rates for the 2020/21 tax year.
Self-Employment Income Support Scheme
A taxable cash grant of up to 80% of average trading profits over three years will become available for the self-employed operating with trading profits of less than £50,000, and who earn at least half of their income from self-employment.
HMRC will contact those eligible, and pay the money (capped at £2,500 per month for three months) directly into their bank account as a single lump sum in June.
How can businesses survive when the lockdown is lifted?
Controlling cash and cutting costs are fundamental to business survival when the immediate crisis passes and businesses re-emerge from lockdown. Daily and weekly cash flow forecasting allows informed decision making around whether funding is needed, but reducing costs is also key.
Business owners need to scrutinise regular payments, retaining only those vital to operations as they stand now. On a broader scale, redundancies, debt restructuring, or formal insolvency measures may be necessary for survival in the future.
Coronavirus has caused vast swathes of the economy to close down, leaving businesses struggling to survive even in the short-term – businesses that only a few weeks ago were enjoying healthy trading figures and strong cash flow. The word ‘unprecedented’ has been widely used in recent weeks, but it clearly describes the scale of the issue we are facing in keeping businesses and the economy going.