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)
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.
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.
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.
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.
You have until the end of September 2020 to apply.
Bounce Back Loan Scheme (BBLS)
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 until 4 November 2020.
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 announced the scheme on on 27 April 2020.
The Future Fund
This government scheme offers convertible state-backed loans (from £125,000 to £5 million) 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, announced on 20 April 2020, will go live in May and stay open until September – it will be delivered in partnership with the British Business Bank.
The government has yet to confirm the headline terms but as at 20 April 2020 it 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)
The government introduced this scheme on 2 April 2020 aimed at mid-sized and large companies with an annual turnover between £45m and £500m and made its latest changes on 26 May 2020.
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).
Coronavirus Job Retention Scheme (the “furlough scheme”)
Under the “furlough scheme” all UK employers have been able to request a reimbursement from HMRC as long as they continue paying part of the salaries of employees who would otherwise have been laid off during the crisis.
The scheme will close to new entrants on 30 June.
HMRC will reimburse 80% of “furloughed” workers’ wage costs, up to a cap of £2,500 per month (for each employee) until the end of July.
The Chancellor announced on 12 May that the scheme will be extended by an extra 4 months to the end of October.
From 1 July, businesses are allowed to bring furloughed employees back part-time (as per the Chancellor’s latest announcement on 29 May).
From 1 August employers will gradually pick up more of the wage bill, starting with employer national insurance contributions and pension contributions which, for the average employer, amounts to 5% of employment costs.
In September the government will pay 70% of wages up to a cap of £2,187.50, with employers paying ER NICs and pension contributions and 10% of wages to make up 80% total, up to a cap of £2,500.
By October the government will pay 60% of wages up to a cap of £1,875, with employers paying 20% on top of ER NICs and pension contributions.
The scheme is set to end on 31 October.
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.
Deferral of VAT payments for Q2 2020
HMRC is allowing 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.
You won’t need to make a VAT payment in this period and you don’t need to apply for the deferral or tell HMRC – it’s an automatic offer.
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
If you’re self-employed, you might have already claimed a taxable grant under the government’s coronavirus (COVID-19) Self-Employment Income Support Scheme (SEISS).
For the first SEISS grant, you can go online before 13 July and, if you find you’re eligible, claim 80% of your average monthly trading profits over a 3-month period (based on 3 consecutive years’ tax returns up to April 2019). HMRC pays you in one single instalment, capped at £7,500.
The government announced an extension of the scheme on 29 May. If you’re eligible you can claim a second and final grant in August, capped at £6,750 and based on 70% of your profits this time, rather than 80%.
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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