What is the government doing to help small and medium-sized businesses struggling with the economic fallout from COVID-19?
You might be one of the many businesses who have temporarily closed because of the coronavirus lockdown. Or you might be soldiering on with substantially lower turnover. No doubt you’ll have read about the various measures that the government has introduced to support businesses like you (and sole traders) who are now facing uncertainty around what comes next.
You’ll find below clear summaries of these government loans, grants and other measures. We’re here to help you find the most relevant support for your business during this time of need.
The government’s new recovery loan scheme, announced at the Spring Budget on 3 March 2021, will replace the previous emergency government loan schemes (including the Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Schemes) when they close.
The Recovery Loan Scheme will launch on 6 April 2021, offering loans from £25,000 to £10m to businesses impacted by the pandemic and will close on 31 December 2021, “subject to review”. The government will provide lenders with an 80% guarantee to ensure they have confidence to lend to businesses. There will be two types of finance: term loans and overdrafts from £25,000 to £10m per business; and invoice finance and asset finance from £1,000 to £10m per business.
Finance terms are up to six years for term loans and asset finance facilities, and up to three years for overdrafts and invoice finance facilities.
Lenders will not take personal guarantees on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.
We will keep you updated as and when we have more information from the government.
Businesses still have until 31 March 2021 to apply for CBILS, after the government extended the scheme on 17 December 2020.
You may be able to access the government’s new recovery loan scheme, which launches on 6 April 2021 and was announced as part of the Spring Budget on 3 March, 2021. It replaces CBILS and the other government guarantee schemes when they close.
If you’ve been turned down for the CBILS or thought you were ineligible, you might want to check again. This is because on 30 July the European Commission changed state aid rules in order to allow governments to support micro and small companies even if they were in financial difficulty at the end of 2019.
The British Business Bank confirmed these important changes on 27 September 2020. The new guidance allows the lender to make the ‘undertaking in difficulty’ at the date you apply for the scheme. This means that if your business was an ‘undertaking in difficulty’ on 31 December 2019 but is no longer an ‘undertaking in difficulty’, you’re now eligible for the schemes. In practice, this flexibility means that you can take action to convert your debt (e.g. loan notes) to shares (equity) in order to qualify for CBILS. In other words you’ve the option, to restructure your finances so that you can become eligible before you make your application.
Businesses with an annual turnover of less than £45m can borrow between £50,001 and £5m for up to 6 years, from more than 40 pre-approved (accredited) lenders. The first 12 months is interest-free.
CBILS is a £330bn package of lending for eligible small and medium-sized enterprises, based on the Enterprise Finance Guarantee (EFG).
It’s aimed at UK businesses who are experiencing lost or deferred revenues and hence disruptions to their cashflow.
Lending options include term loans, overdrafts, asset finance and invoice finance.
Up to £250,000 (per business) can be unsecured borrowing, at the discretion of the lender (who is not allowed to take personal guarantees for facilities below than £250,000).
For facilities above £250,000, the lender may require a personal guarantee, but the government has capped this at 20% of the outstanding balance “after business asset recoveries” – the lender is not allowed to take a Principal Private Residence (PPR) as security to support a personal guarantee or as security for a CBIL-backed facility.
Under the scheme the lender is given a government-backed partial guarantee of up to 80% against the outstanding facility balance, subject to an overall cap per lender.
The borrower always remains 100% liable for the debt.
Accredited lenders include high street banks, challenger banks, asset-based lenders and smaller specialist local lenders.
For all facilities, including those over £250,000, CBILS can support lending to viable smaller businesses even where a lender considers there to be sufficient security for a normal commercial loan.
Businesses still have until 31 March 2021 to apply for a Bounce Back Loan, after the government extended the scheme on 17 December 2020.
After this, you may be able to access the government’s new Recovery Loan Fund, which launches on 6 April 2021 and was announced as part of the Spring Budget on 3 March, 2021. It replaces BBLS and the other government guarantee schemes when they close.
and replaces BBLS and the other government guaranteed schemes.
If you’re a small or medium-sized business affected by coronavirus you can borrow between £2,000 and £50,000 (capped at 25% of your turnover) under the government’s Bounce Back Loan scheme (BBLS).
You can apply to accredited lenders with a simple form and can expect to have cash in the bank “within days”.
If you’ve already taken out a Coronavirus Business Interruption Loan of £50,000 or less and you’d like to transfer this into the BBLS, you can arrange this with your lender.
If you already have a Bounce Back Loan but you’ve borrowed less than you were entitled to, you can, from 10 November, top up your existing loan to your maximum amount. You must request the top-up by 31 March 2021.
BBLS loans are backed by a 100% government guarantee, which means the government will cover the bank’s losses if a customer defaults on their loan. (The other government schemes are covered up to 80%.)
The government has agreed with lenders that these loans will have a flat rate of 2.5% interest. It will pay the interest for the first 12 months and you also won’t have to make any capital repayments during this period.
The loans are for six years but there are no early repayment fees.
The Chancellor first announced the scheme on 27 April 2020.
In the Spring Budget, delivered on 3 March 2021, the Chancellor pledged another £375 million for the Future Fund – now known as the Future Fund: Breakthrough. This new fund aims to support high-growth sectors like life science and clean tech, more specifically businesses aiming to raise at least £20m of funding.
The existing Future Fund closes on 31 March 2021, after the government extended the Fund on 17 December 2020 (it was due to close at the end of January 2021). It offers convertible state-backed loans (from £125,000 to £5m) to innovative UK-based companies, as long as the cash is at least matched by private investors and institutions (e.g. venture capital backers).
These loans, if not repaid, will automatically convert into equity stakes (valued at a discount).
The scheme aims to help UK-based businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.
To be eligible, you must be an unlisted UK-registered company that has raised at least £250,000 in equity investment in the past five years.
The scheme went live in May and is being delivered in partnership with the British Business Bank.
The government plans to inject a total of £250m, the maximum term of the loan is 36 months and the interest rate is minimum 8% (minimum) per annum (non-compounding), payable to the government on maturity of the loan.
Businesses now have until 31 March 2021 to apply for CLBILS, after the government extended its three coronavirus business interruption loan schemes and the Future Fund on 17 December 2020.
You may be able to access the government’s new Recovery Loan Fund, which launches on 6 April 2021 and replaces CLBILS and the other government guarantee schemes when they close.
The government introduced CLBILS on 2 April 2020 aimed at mid-sized and large companies with an annual turnover between £45m and £500m.
CLBILS covers four main types of finance: term loans, revolving credit facilities (including overdrafts), invoice finance and asset finance.
The government increased the upper limit on borrowing to £200m on 26 May 2020 for term loans and revolving credit facilities.
The maximum size for invoice finance and asset finance facilities remains at £50m.
For facilities greater than £50m there are additional eligibility criteria for the borrower (and the lender will have gained additional accreditation).
CLBILS gives the lender a government-backed partial guarantee (80%) against the outstanding balance of the facility.
Borrowing is between three months and two years.
Lenders are not are permitted to take personal guarantees for facilities under £250,000 – for facilities of £250,000 and over claims on personal guarantees can’t be more than 20% of losses after all other recoveries have been applied.
This third COVID-19 lending scheme was designed to help the so-called “squeezed middle” companies which weren’t able to access the two other schemes that were live at the time (i.e. CIBLS or the Covid Corporate Financing Facility).
The original Small Business Grant Fund (SBGF) is now closed but you can still contact your local authority if you haven’t received your relief on business rates. The same applies for the Retail, Hospitality and Leisure Grant for the tax year 2020-21.
You can find more guidance on eligibility for cash grants here.
If you have any queries you should contact your local authority.
The “furlough scheme” will now run until September 2021, as announced in the Spring Budget in March 2021.
The government will continue to pay up to 80% of the salary of employees for hours they can’t work, until September 2021, with a cap of £2,500 a month.
Employers will still be required to pay the wages, National Insurance (NI) contributions and pensions for hours worked, as well as NI contributions and pensions for hours not worked.
Nothing will change until July, when employers will be expected to pay 10% towards the hours their employees don’t work, increasing to 20% in August and September, as the economy reopens.
The government launched the Coronavirus Job Retention Scheme in March 2020. It was initially set to run for three months (up to the end of May 2020). It has now been extended five times and it will have run for 18 months by the time it ends.
HMRC allowed all UK businesses (and self-employed people) to defer VAT payments due between 20 March 2020 and 30 June 2020.
You can either pay the VAT due for these three months by 31 March 2021 (if you haven’t paid it already) or you can opt in to the VAT deferral new payment scheme between 23 February 2021 and 21 June 2021, which allows you to extend your deferral until January 2022.
If you do opt in, you can pay in smaller instalments up to the end of January 2022, interest-free.
If you don’t opt in, you’ll need to pay your deferred VAT by 31 March 2021.
Remember, you’ll need to have cancelled any direct debits to HMRC with your bank.
The government will pay VAT refunds and reclaims as normal.
If you’re self-employed, you might be able to claim a fourth grant under the government’s Self-Employment Income Support Scheme (SEISS), covering the period February to April 2021.
Your eligibility for the fourth SEISS grant will depend on whether you experienced a significant financial impact from coronavirus between February and April 2021.
You might also be able to claim a fifth and final grant, covering the period from May to September 2021. The Chancellor announced this final grant on 3 March 2021 as part of the Budget.
The fourth SEISS grant will be set at 80% of 3 months’ average trading profits for up to four tax years between 2016 to 2020 and will be paid out in a single instalment, capped at £7,500.
You need to claim the fourth SEISS grant by 31 May 2021. HMRC will contact you mid-April if you’re eligible.
You’ll be able to claim the fifth grant from late July if you are eligible.
The value of the fifth grant will be determined by a new turnover test. If your turnover has fallen by 30% or more in the year April 2020 to April 2021 you will continue to receive the full grant worth 80% of three months’ average trading profits, capped at £7,500. If your turnover has fallen by less than 30% or less, you’ll receive a 30% grant, capped at £2,850.
It doesn’t matter whether you have claimed the previous three SEISS grants, which are now closed. Incidentally, these first three SEISS grants, which covered the period from March to January 2021 supported 2.7 million people, with claims totalling £19.7 billion.
Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The Chancellor announced this as part of his Spring Budget.
This support is for UK-based small and medium-sized businesses employing fewer than 250 employees as of 28 February 2020.
This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19.
You’ll find more information on the government’s website here.
The Chancellor announced another business rates holiday for the struggling high street until the end of June 2021 as part of his Spring Budget on 3 March 2021. From July 2021, business rates will be discounted.
If you own a retail, leisure, hospitality or nursery business (based in England) you’ll have been exempt from business rates for the 2020-2021 tax year.
You won’t have had to take any action – this will have been applied to your council tax bill – but local authorities might have had to reissue your bill automatically to exclude the business rate charge.
If you own a high street business (including retail, hospitality and leisure properties, estate agencies, lettings agents and bingo halls) and you’ve been forced to close because of COVID-19 restrictions, you should have discovered by now that you were exempt from business rates for the 2020-2021 tax year.
We’ve split our COVID-19 guidance into three main sections below.
A summary of the government-backed support for businesses impacted by coronavirus
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