Coronavirus funding & support for small businesses

The below information is relevant only to UK SMEs located in London. Please be aware that businesses located in Scotland and Wales may have different funding and support on offer. Be sure to check your business insurance for interruption cover for pandemics.

Coronavirus Business Interruption Loan Scheme (CBILS)

Summary

  • Temporarily replaces the Enterprise Finance Guarantee (“EFG” Scheme) with the aim to support SMEs, which may have limited or insufficient security, to raise additional funding.
  • £1,000 to £5 million.
  • Finance tenor from 3 months up to 6 years for term loans and asset finance.
  • Interest free for the first 12 months (covered by government).
  • Government provides a guarantee to the lender for 80% of facility value.
  • Companies remain liable for capital repayment.

Funding types

  • Term loans
  • Overdrafts
  •  Asset finance
  • Working Capital Facilities (RCF, invoice discounting, supply chain financing)

Eligibility criteria includes

  • Turnover of no more than £45m per annum.
  • Operates within an eligible industrial sector (covers all SBI Innovation Support Programme Members).
  • Your business must generate more than 50% of its turnover from trading activity
  • Sound borrowing proposal but lacking sufficient security to meet lender requirements – this means you must show in your borrowing proposal that, were it not for the COVID-19 pandemic, your business would be considered viable by the lender.
  • Must not have exceeded de minimis State Aid value of €200,000 equivalent over the current and previous two financial years. This does not include SME R&D Relief as it is not a de minimis State Aid.

How to apply

  • Find one of 40 accredited lenders through the British Business Bank here. Accredited lenders are a mix of high street banks and smaller specialist lenders (eg invoice discounting, asset-based lending).
  • Approach the lender yourself – be patient with phone lines as demand is currently high.
  • If one lender turns you down, approach a different lender.
  • If the lender can provide finance under normal commercial terms, they will do so
  • If the lender cannot provide finance on normal commercial terms, they will decide whether the business can be supported by CBILS and seek to use the scheme to alter a negative credit decision.
  • The borrower remains liable for the borrowing at all times.

What you should consider before applying

1. Assess your funding need

  • How much money do I need and for how long?
  • Is borrowing through the scheme the best route for me to take?
  • What collateral do I have available as security? What will a lender look at? Do I have a ‘sound borrowing proposal’?
  • What is the most appropriate type of financing?

2. Engage with the process

  • Which and how many lenders do I approach?
  • What information will I need and what will I need to have considered?
  • How long does the process take from application to receiving funds?
  • How do I maximise the chance of a successful application?

For early stage businesses in their first two years of trading, the British Business Bank’s Start Up Loans Programme may be more suitable.

SME Cash Grants

Summary

  • On 17 March, the chancellor announced an increase in the small business coronavirus cash grant, taking it from £3,000 to £10,000
  • Grant money should become available in early Aprils

Eligibility

  •  If you qualify for Small Business Rate Relief (SBRR) or Rural Rate Relief, you’ll be able to get the funding

How to apply

  • Your local authority will contact you once the scheme is up-and-running; you do not have to apply.
  • Find your local authority here.

HMRC Time to Pay

Summary

  • VAT deferral: The next VAT quarter payments from 20 March 2020 until the end of June will be deferred and businesses will have the until the end of the financial year to repay
  • A dedicated helpline has been set up by HMRC through which arrangements will be tailored to specific circumstances
  • No formal guidance has yet been offered by HMRC

Eligibility

  • All businesses in distress with outstanding tax liabilities, including PAYE, may be eligible for support.
  • Also includes self-employed persons who are in temporary financial distress because of COVID-19 with outstanding tax liabilities.

How to apply

  • HMRC will want to see that other options have been considered before resorting to Time to Pay, and will request evidence of this.
  • If you have a Customer Relationship Manager, approach them first if this is possible.
  • If you don’t have a Customer Relationships Manager or you are not able to get hold of them, ring the HMRC COVID-19 Helpline: 0800 0159 559
  • Ensure that any requests put to HMRC do not come across as alarmist. This is to prevent HMRC from acting quickly to protect their position ahead of insolvency
  • HMRC will be reviewing historic tax payments and compliance in light of Time to Pay requests
  • Keep evidence where possible, including notes of calls

HMRC Business Rates Reduction

Summary

  • Full rates relief for all companies in the retail, hospitality and leisure sectors
  • 12 month business rate holiday irrespective of rateable value
  • Retail, hospitality and leisure businesses may be provided with a cash grant of £25,000. Find out more information about this here.

Eligibility

  • For cash grants, retail, hospitality and leisure businesses must be operating from smaller premises with a rateable value between £15,000 and £51,0000

How to apply

  • The cash grant will be applied to your next council tax bill in April 2020 – you do not need to take any action

HMRC Coronavirus Job Retention Scheme

Summary

  • The government will cover up to 80% of the current wage level of any employee who is designated as a “furloughed” worker due to the pandemic, provided they are kept on the employers’ payroll.
  • ‘Furlough’ essentially means putting employees on a temporary leave of absence where they do no work and receive no pay, but they are retained on your books to be bought back in when you need them.
  • The maximum amount payable under the scheme is £2,500 a month per employee (up to 80% of £3,125 gross wages).
  • Employers can still top up salaries above this level if they choose to.
  • The scheme will be backdated for those who have been unable to work since 1 March 2020. It is expected to last for at least three months and PWC expect this to be extended.
  • Chancellor Rishi Sunak has stated that he hope the first grants will be paid by the end of April 2020.

Eligibility

  • The scheme will apply to all employers.
  • Any employee can be furloughed, but they need to be on PAYE in order for you to be able to claim the grant for their wages.
  • There are no minimum or maximum numbers of employees who can be furloughed.
  • If you have already taken the step of laying off staff members, you can get in touch with these employees and agree to change their current status from lay off to furlough.
  • There is currently no guidelines referring the furlough and pay of employees on zero-hours contacts.

How to apply

  • HMRC will be setting up an online portal for applications before the end of April.
  • We will keep updating the information on our COVID-19 page so that you’ll be informed as soon as you can access the portal.
  • Employers will submit information about the employees that have been furloughed and their earnings. Other details will also be required but are still to be confirmed.
  • You will then receive a grant to cover the 80% wages.
  • If you are experiencing or facing short term cash flow problems, the Government are encouraging businesses to see if they qualify for a Coronavirus Business Interruption Loan.

Key considerations

  • If you are not placing everyone on furlough, consider the skills you’ll need to get through this period carefully and plan accordingly.
  • Do not assume that furlough is the best option for employees labelled as high risk by the government. Forcing them onto furlough without their input may result in discrimination claims from those who allege they were made to do it because of their age, disability or pregnancy.
  • Your ability to furlough an employee depends on their contract (though it is unlikely that employee contracts will include a specific right to use furlough).
  • If the employment contract contains a right to lay off employees on no pay, you can already not pay them for a temporary period. These employees will get statutory guarantee pay (SGP) instead of the 80% of their wages.
  • SGP is £29 a day for a maximum of five days in a rolling 13 week period.
  • Furlough is a more favourable option for employees in terms of pay.
  • If contracts do not contain a right to unpaid lay off, you can ask the employee to agree to furlough.
  • If alternative options can’t be found, the end result may be redundancy.
  • This may be a preferable option for employees who are currently struggling to find childcare.
  • It is unclear as to whether employees can supplement furlough with a second income.

HMRC Refund of Statutory Sick Pay

Summary

  • Employees will be eligible for SSP from day one instead of day four
  • Businesses can reclaim SSP for employees for up to two weeks sickness absence due to COVID-19

Eligibility

  • Employers be an SME with a turnover below £43 million
  • Employers must have a workforce of less than 250 employees.

HMRC Payroll Initiatives

Summary

  • IR35 will be delayed until April 2021 to help businesses and contractors

HMRC Tax Self-Assessment Deferral

Summary

  • Self-employed persons who pay tax through self-assessment will have their next self-assessment tax payment deferred to 31 January 2021.

Sources

COVID-19: Cashflow considerations and UK Government Financing and Tax Options, PWC, March 2020

S34 Furlough and the Job Retention Scheme, Peninsula Business Services Limited, March 2020

Coronavirus Business Interruption Loan Scheme, British Business Bank, March 2020

CBILS FAQs, British Business Bank, March 2020