Small businesses are facing their biggest ever crisis because of coronavirus. A large firm may have reserves to help get through the emergency, but if you don’t have the luxury of cash in the bank, the sudden reduction in customer numbers – or even a complete shutdown – could mean that the cashflow your business depends on simply is not there anymore.
But government help is available, and at Continuum we want to ensure that it can provide the lifeline you need.
Getting government support
The government is working to provide financial lifelines for small businesses which could help provide the cashflow you need. The initial figure being talked about is £330 billion, equivalent to 15% of UK GDP, spread across a number of schemes.
The Coronavirus Job Retention Scheme. This is designed to help employers whose operations have been affected by the COVID-19 epidemic to retain their employees. If you cannot pay your workforce you can furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month, as well as your National Insurance contributions. Remember, if you are self-employed, you can in effect furlough yourself, and get a similar payment based on the salary you paid yourself averaged across the last three years.
You can also apply for Sick Pay support if your workers are showing signs of symptoms of the virus, and you need to send them home.
VAT and Income Tax payment deferral. Tax and VAT represent major drains on your cashflow in normal times, and in the current circumstances, they can become an impossible burden. The government will defer VAT payments for three months (March to June 2020), and any Income Tax payment due in July can be deferred until January.
If you are in the retail, hospitality and leisure sectors, all of which have been particularly badly affected, you will be able to take advantage of a 100% business rate holiday for the 2020 to 2021 tax year.
Local authority Cash Grants. Cash grants of up to £25,000 per property are being made available to businesses in retail, hospitality and leisure businesses via their Local Authority. Retail businesses are not simply shops, but restaurants, cafés, bars, cinemas and live music venues and others where doing business depends on the presence of customers.
The amount will be based on criteria such as sector and rateable business value. Smaller businesses could receive £10,000, but if your retail business has a rateable value between £15,000 and £51,000, the local council grant could rise to £25,000.
Coronavirus Business Interruption Loan Scheme – CBILS. This scheme provides loans interest free for 12 months. CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance. The loans will be provided on a commercial basis by banks and other lenders, but with underwriting supported by the government, lenders should be more positively disposed to lending.
The Bounce Back Loan Scheme. This is designed to overcome the shortcomings of the CBILS scheme for small businesses. The sums available are smaller, but the interest rates are low and fixed – and the application process can take minutes instead of weeks.
What should you do now?
You have probably already taken steps to reduce your outgoings and talked to suppliers. Once you have plugged some of the obvious holes in your cashflow, it is time to start using all the available ways to bring more cash in – and these government measures could provide it.
We can work with your accountant and discuss the best ways to use the loans and grants available to get your business back on track – and ready to take full advantage of the recovery when it comes.
Call us today to start looking at the future of your finances – and your business.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable funding or business strategy, you should seek independent financial advice before embarking on any course of action.
The Financial conduct authority does not regulate taxation advice, accountancy services and some aspects of unsecured loans.