The chancellor has said he will do “whatever it takes” to protect businesses from the effects of coronavirus, but what does that mean in terms of the government support you’re able to access and which of the available measures will work best for your business?
The government has announced an unprecedented set of measures to help businesses overcome the challenges presented by coronavirus. These measures are complex and have been put forward over a number of days, with some businesses struggling to understand what support is available to them and what will work best for their business.
What do you need help with?
Coronavirus is impacting companies’ cash flows across the country, leaving businesses needing emergency access to credit, as well as ways of reducing fixed costs.
Government support so far has focused on these two key issues, with measures aimed at either providing fast access to loans and grants or removing substantial business costs.
These measures are generous and timely, but some do involve businesses taking on debt. As SME owners, it is worth spending time thinking about what support will work best for your business before rushing into anything.
To inform this process, we’ve created an easy to use eligibility checklist alongside a step by step guide to all of the Government’s business support measures which will help you reach the decision that’s right for you.
Got 2 minutes? Our government support eligibility checklist will let you know which schemes you can access.
Got 10 minutes? Learn more about the support available in our in-depth guide below.
So, what combination of support will work best for your business?
The government intend these measures to be used together to remove key pressures on businesses’ cash flow by providing emergency access to credit and removing significant fixed costs.
Step 1: Remove fixed costs (for free)
A number of the measures set out by government over the last few days come at no extra cost, and in some cases, you don’t even need to apply. These initial steps can help remove important overheads and make sense for any business.
The Business Rates Holiday Scheme for businesses based in England in the retail, hospitality or leisure sector (as well as a bespoke scheme for nurseries) removes substantial costs from your business without requiring any action on your behalf, with Local Authorities instructed to automatically apply the tax break to your bills. Find out how much you’re set to save using the government’s online Business Rate calculator.
If your business has other outstanding tax liabilities, you may be eligible to receive support through HMRC’s Time to Pay service. These arrangements are made on a case by case basis, and you can call the HMRC helpline for apply on 0800 0159 559.
A tax that won’t be need paying over the next three months is VAT, with the government introducing a VAT Deferral until June. You do not need to apply for this, and businesses that pay VAT by direct debit should cancel this with their bank if they are unable to pay.
If you need to make difficult decisions about your employee wage bill, then the government’s Coronavirus Job Retention Scheme is here to help. The scheme offers to pay 80 per cent of furloughed employees’ salary (up to £2,500 per month per employee), allowing you to continue to keep them on the payroll whilst significantly reducing your staffing overheads.
The scheme, which is due to be completed before the end of April, is backdated until 1 March and will initially run for three months. To apply, you’ll need to designate affected employees as furloughed workers and submit information to HMRC about these employees and their earnings. Learn more about the Coronavirus Job Retention Scheme.
If you’re struggling with employees who are off sick, or self-isolating on government advice, you can also claim Statutory Sick Pay rebate, which allows businesses to claim back two weeks of Statutory Sick Pay, at a value of £188.50 per employee. The scheme is not available at this stage, but further details will be published in due course.
If you’re self-employed, then income tax payments due in July 2020 under the self-assessment system will be deferred to January 2021. This is an automatic measure, with no applications required.
Step 2: If you’re eligible, don’t take it for granted
The government has also made a number of cash grants available to businesses based in England in the retail, hospitality and/or leisure sector.
The size of these grants is determined by the rateable value of your business’s property, with those of a value of up to £15,000 receiving a grant of £10,000 and those with a value between £15,000 and £51,000 receiving a grant of £25,000. If your business’s property has a rateable value of over £51,000 then you are not eligible for the grant.
Remember, this grant doesn’t need to be repaid, so if you’re eligible make sure you claim it. You can expect a letter from your Local Authority in due course if you are able to access this support measure. If you don’t know who that is, find out using the government’s online tool.
You may also eligible to receive a cash grant of £10,000 if you’re a small business based in England who already receive small business rate relief, rural rate relief or tapered relief.
Once again, your Local Authority will write to you if you’re eligible. With no need to repay, it’s a no-brainer to claim it.
Step 3: Still need help keeping your cash flow positive? Consider a loan
The measures outlined above are comprehensive and do not involve taking on debt.
However, if you need more support to keep your business going, then you should consider taking advantage of the government’s Coronavirus Business Interruption Loan. These are designed to support SMEs by providing loans of up to £5m, that are interest free for the first year and can be repaid over the course of six years.
The loan is available to use now via 40 commercial lenders (including all the major banks) and is backed by the government-owned British Business Bank (BBB). A list of these accredited providers is available to view on the BBB’s website.
It is important to note that the government’s guarantee on these loans is aimed at providing banks with the confidence to lend, rather than any insurance for you and your business. That means your business will remain 100 per cent responsible for any debt incurred as a result of the loan. The Times’ business journalist James Hurley has put together a helpful thread on other issues to watch out for when considering a Coronavirus Business Interruption Loan Scheme application.
Whilst taking on debt can be daunting; these loans are aimed at helping successful businesses stay afloat in unprecedented times. The economic damage being inflicted by coronavirus is not structural at this stage, and if your business was doing well before the crisis, there is no reason it shouldn’t be able to rebuild and thrive following it.
If you’re a high growth company impacted by coronavirus, you may also be able to access the Government’s £500 million co-investment “Future Fund”. This fund provides loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors. These convertible loans may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.
If you need more time to decide, there are a few other steps you can take to improve your liquidity. Enterprise Nation founder Emma Jones has written a helpful summary of these options, which include challenging extended payment terms, as well more information on the support being offered by the government.
If you are a larger business with an annual turnover of £45m to £500m, there is a new scheme called the Coronavirus Large Business Interruption Loan Scheme which has been announced. Based on similar terms, full details will become available later in April.
Don’t forget our eligibility checklist gives you a quick outline of which government support you can access.