The latest on Government support for small businesses
Information is coming out from the Government thick and fast on the support it is providing to small businesses during the coronavirus crisis.
On the one hand, it is reassuring to know that the Government doesn't want to see any business fail or lay employees off due to circumstances that are entirely beyond its control. On the other, you would be forgiven for being overwhelmed by the amount of information that is coming out and left feeling decidedly uncertain about what support you are entitled to and how to access it.
The Government is putting information and guidelines into the public domain as soon as it's available and, in the first instance, we highly recommend that you visit and bookmark this web page.
In brief summary, we believe that all businesses should look at their entitlement to:
Grant Funding: If you are a small business that receives Small Business Rates Relief on the property that you occupy, you will receive a grant of £10,000 regardless of the sector that you operate in. Retail, leisure and hospitality businesses will receive a larger grant of £25,000 if your property has a rateable value of between £15,000 and £51,000. There is no need to apply for the grant. Your local authority will be writing to you shortly. Unfortunately, we don't have any insight yet on the precise timelines.
VAT: Any VAT liability for the period 20 March to 30 June is deferred. This will keep welcome cash in the business in the short term, but do keep in mind that the VAT will still be payable. At the present time, the Government is saying this will need to happen by the end of the 2020/21 tax year. The VAT deferment is only, therefore, an interest free loan from HMRC.
Loan Support : We blogged about the Coronavirus Business Interruption Loan Scheme (CBILS)as soon as the first news of it came out and it's clear that the Government's thinking has moved on in the meantime. Some of our earlier fears have been allayed, but it's still important for businesses to understand that a) it's a loan, not a grant b) your business will remain 100% liable to repay it and c) viability post the coronavirus crisis will still have to be proved to the lender.
Other support is available for things like business rates and sick pay, all of which is neatly summarised here.
Full details of the CBIL scheme are available here. Among the most welcome refinements are that lenders are being encouraged not to seek additional security for loans of up to £250,000 and that the Government will pay interest and any lender fees for the first 12 months. We expect to see different interpretations among lenders about the requirement for directors' personal guarantees although are pleased to see that all of the "Big 5" banks have now come forward and said personal guarantees will not be required for loans of under £250,000.
Applying for a CBIL
There are 40 accredited lenders for the CBIL scheme and we are independent of all of them.
The biggest assessment your lender will be required to make is the one about your "viability", namely whether your business is likely to be able to repay the loan once the worst of the crisis is over.
Our team here at Productivity Finance is well placed to help you make your case in our lending write-up, which we use to support any applications that we submit. The key will be proving that your business was sound before the crisis and that profitability should be restored once it's all over, even though a temporary loss is inevitable in the meantime.
Keep in mind too that there is a need to provide an assessment of the assets that your business and its directors have to support the loan. Pledging personal assets is something that you and your fellow directors will want to consider and position carefully to any lender that is insisting on them, so it's worth taking advice on this before making your approach.
Other finance requirements
Outside of the CBIL, we expect many more businesses will need working capital support post all of this. Any cash reserves that were previously used for working capital are likely to be severely depleted so the need for overdrafts, invoice finance and other forms of revolving credit is likely to go up. If that sounds like your most likely position, it's worth you seeking advice on whether to go for a CBIL loan now or apply for a different form of finance later.
To help you, we are happy to do a short review of your business's funding requirements and the appropriate solutions and lenders. We will not charge for this review.
If you engage us fully to arrange finance on your behalf, we will do a full credit appraisal, covering both the financial and non-financial aspects of your business, which the banks and other accredited lenders can use in their underwriting processes.
In your corner
The market is a minefield right now. A vast number of lenders are hardening their lending criteria, so it's important that you have somebody independent and impartial in your corner who is "in the know" and can help you put your best case across. This can include challenging back when necessary. With access to 100+ lending solution providers, and being a preferred broker with access to preferential service level agreements and offers from many, we are well positioned to help.