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.
Coronavirus Business Interruption Loan Scheme (CBILS)
Businesses now have until 31 March 2021 to apply for CBILS, after the government extended the scheme on 17 December 2020.
If you have 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.
Bounce Back Loan Scheme (BBLS)
Businesses now have until 31 March 2021 to apply for a Bounce Back Loan, after the government extended the scheme on 17 December 2020.
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 on 27 April 2020.
The Future Fund
You have until 31 March 2021 to apply to the Future Fund, after the government extended the Fund on 17 December 2020 (it was due to close at the end of January).
This government scheme 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 will now stay open until 30 November 2020 – it will be 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.
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
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.
The government introduced this scheme 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).
Cash grants for businesses with a rateable value below £51,000
You may be entitled to a cash grant from your local authority under one of two new government schemes:
Under the Small Business Grant Fund (SBGF) all businesses in England in receipt of Small Business Rates Relief (SBRR) and Rural Rates Relief (RRR) will be eligible for a grant of £10,000 – your local authority will write to you so you don’t need to take any action.
Under the Retail, Hospitality and Leisure Grant (RHLG) all businesses in England in receipt of the Expanded Retail Discount with a rateable value between £15,000 and £51,000 will receive a grant of £25,000.
You can find more guidance on eligibility for cash grants here.
If you have any queries you should contact your local authority.
The new job support scheme replacing the Coronavirus Job Retention Scheme (the “furlough scheme”)
The “furlough scheme” has been extended until the end of April 2021, with the government continuing to contribute 80% towards wages (as announced on 17 December 2021).
The government will continue to pay up to 80% of the salary of employees for hours not worked until the end of April, with a cap of £2,500 a month. Employers will only 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.
From May 2021 the original “furlough scheme” will be replaced by a new new job support scheme, which will be open to all businesses – not just those who have taken advantage of the “furlough scheme”.
The new, German-style job support (wage subsidy) scheme will see the Treasury stepping in to subsidise only those employees who work at least a third of their usual hours (as announced on 24 September 2020).
Employees eligible for this new job support scheme would be paid by their employers for the hours they work. For the remaining hours, the government and employer would pay a third of the wages each, while the employee would forgo the final third. The scheme therefore cuts government support per job to a maximum of 22%.
Employers are also be able to claim an additional £1,000 “job retention bonus” – announced by the Chancellor in July – if they bring people back from the furlough scheme and retain them until the end of January 2021. Employers are also be able to claim an additional £1,000 “job retention bonus” – announced by the Chancellor in July – if they bring people back from the furlough scheme and retain them until the end of January 2021.
Deferral of VAT payments for Q2 2020
HMRC allowed all UK businesses (and self-employed people) to defer VAT payments due between 20 March 2020 and 30 June 2020.
You will have to pay the VAT due for these three months on or before 31 March 2021.
If you do deferred VAT due from 20 March to 30 June 2020 you now have the option to pay in smaller payments over a longer period, as per the Chancellor’s announcement on 24 September 2020. Instead of paying the full amount by the end of March 2021, you can make smaller payments up to the end of March 2022, interest-free.
You’ll need to opt-in to this scheme. If you don’t opt in you’ll need to pay your deferred VAT by 31 March 2021.
You will however need to cancel any direct debits to HMRC with your bank in good time.
The government will pay VAT refunds and reclaims as normal.
Support for the self-employed (SEISS grant extension)
If you’re self-employed, you might be able to claim a grant under the government’s Self-Employment Income Support Scheme (SEISS) grant extension, announced on 24 September 2020.
It doesn’t matter whether you have claimed the previous SEISS grants, but before you apply make sure that you meet the three criteria, i.e. that you are: currently eligible for SEISS; continuing to trade; impacted by reduced demand due to coronavirus in the qualifying period for the grant extension (i.e. between 1 November and the date of your claim). The extension will provide two grants and will last for six months, from November 2020 to April 2021.
The amount the scheme’s third grant is worth has changed a few times. Initially the third SEISS grant, which covers November 2020 to January 2021, was only due to be worth 20% of average monthly trading profits. This has since increased to 40%, then to 55%, and now the third grant is worth 80% of average monthly trading profits, capped at £7,500 in total over three months.
Grants will be paid in two lump sum instalments each covering a three-month period.
Aside from the SEISS, the government will let you defer Income Tax payments due in July 2020 under the Self-Assessment system to January 2021 – you don’t need to apply but you do need to cancel any direct debits to HMRC with your bank in good time.
You can also defer VAT payments for three months, for VAT payments due between 20 March 2020 until 30 June 2020 (the government will pay VAT refunds and reclaims as normal).
The minimum income floor for anyone affected by the pandemic has been suspended. This means “self-employed people can now access, in full, Universal Credit at a rate equivalent to statutory sick pay for employees.”
Support for businesses paying sick pay
The government is bringing forward legislation to allow small and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19.
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 2 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.
Business rates holidays
If you own a retail, leisure, hospitality or nursery business (based in England) you’ll be exempt from business rates for the 2020-2021 tax year.
You don’t need to take any action – this will apply to your next council tax bill in April 2020 – but local authorities might have 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’ll also be 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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