The outbreak of COVID-19 has been one of the biggest disruptions to businesses and daily life in living memory. During this time, it is important to get clear and accurate information and know where you can seek support. Below is a summary of the latest financial support schemes that are available to business owners in the UK.
Job Retention Scheme
All UK businesses are eligible to access this scheme where the UK government will support business by paying part of their employees’ salary in the case that those employees would be otherwise laid off or stood down as a result of the COVID-19 crisis. All UK businesses are eligible.
To apply for this, your application must be registered with HMRC through an online portal. You must formally classify your employees to “furloughed workers” and notify the employees themselves. Please note that this is still subject to existing employment law and may require negotiation depending on employment contracts. HMRC will reimburse business owners 80% of “furloughed workers” wage costs, up to a cap of £2,500 per month.
Coronavirus Business Interruption Loan Scheme (CBILS)
As part of the UK government’s financial support to businesses, this new scheme is being rolled out and facilitated by the British Business Bank (BBB). This scheme mainly focuses on supporting small and medium-sized businesses in accessing bank lending and overdrafts during this time of economic stress.
The BBB does not provide the loans directly to businesses feeling the effects of the COVID-19 pandemic, rather it’s supporting accredited lenders who will carry out the loan funding and implementation. The scheme is available from more than 40 accredited lenders, ranging from high-street banks, to asset-based lenders and smaller specialist local lenders.
The scheme itself is designed to encourage banks to provide lending facilities to businesses during the crisis by removing some of the associated risks inherent in commercial lending. The BBB’s plan to achieve this is by providing a guarantee of 80% on each total loan facility value.
The scheme is available to businesses with a turnover of up to £45m, with government backed finance of up to £5m. All interest payments along with any lender specific fees for qualifying businesses will be covered for 12 months by the government.
However, there are other conditions businesses will have to meet as each application to an accredited lender is still subject to their respective credit policy, the criteria banks use to assess a business’ suitability for financing.
In summary, to be eligible for support via CBILS, the small business must:
- Be UK-based in its business activity
- Have an annual turnover of no more than £45 million
- Have a borrowing proposal which the lender:
- would consider viable, were it not for the COVID-19 pandemic
- believes will enable you to trade out of any short-term to medium-term difficulty
- Businesses from any sector can apply, except the following:
- Banks and building societies
- Insurers and reinsurers (but not insurance brokers)
- Public-sector organisations, including state-funded primary and secondary schools
There are further details about the criteria and conditions of the scheme available here;
Support for businesses and individuals paying tax
Another support program for business is the government will defer VAT payments in this financial quarter, April-June 2020. Businesses will now have until the end of the tax year to repay those bills.
COVID-19 Corporate Financing Facility (CCFF)
For larger firms the Bank of England announced a further financing facility. This facility aims to support firms who are otherwise financially strong, raise needed working capital via the purchasing of short-term debt instruments. The aim is to ensure these corporations can continue to meet their short-term debt obligations, notably share dividend payments. Moreover, it will support the wider corporate finance markets and increase supply of credit to firms. The scheme is funded by the central bank reserves, will be in operation for at least 12 months, and has the option to be extended to continue to reduce cashflow pressures for the wider economy.
As with CBILS, there are restrictions on which firms are able to access the CCFF. Contact your bank to see if you qualify and if they are able to issue the necessary commercial paper to be able to access the government facility. Please see the Band of England’s website for further information and practical steps;
We wish you, your families and colleagues the best of health during these difficult times and look forward to seeing you again in the near future.
Until then, we will continue to provide regular updates on our website. Please continue to contact Maven using the telephone numbers provided; all general enquiries should be directed to our team at 0191 731 8590 or send an email to firstname.lastname@example.org
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