Thankfully the government has listened to the business community and has come up with lifelines which will help businesses look after their teams and make sure they can put food on their table and pay the rent/mortgage, etc and ultimately this will save lives.
Coronavirus Job Retention Scheme
Furlough employees – current information on this scheme as updated by the Government on 15th April 2020 is as follows:
- 80% of salary of the retained worker will be paid by the Government up to ceiling of £2.5K per month
- Employees who were employed on 19 March 2020 (previously 28 February 2020) are eligible for furlough, provided the employer had submitted real time information payroll data by that date
- The Scheme is not limited to those employees who would otherwise be made redundant. It is applies to any who are furloughed “by reason of circumstances as a result of coronavirus or coronavirus disease”
- A director who is furloughed can only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company’s accounts or provision of other information relating to the administration of the director’s company. This is a very narrow interpretation of directors’ duties
- To claim furlough, the employer and employee must have agreed in writing that the employee will cease all work. This is significant; the guidance only required notification. The Direction from the Treasury requires written agreement. This may mean that many employees who have already been furloughed may not fall within the meaning of the Scheme
- The amount of salary for the employee must disregard anything which is not “regular salary or wages”. That includes disregarding any performance related bonus or discretionary payments (including tips), any conditional payments (e.g. where a threshold must be met) and any non-financial benefits
- The employer cannot claim for any salary which is “conditional on any matter”. This may exclude any salary payments which the parties have agreed are conditional on the Job Retention Scheme paying out
- The employer can claim for earnings which it “reasonably expects to be paid” to the employee – that seems to include deferred earnings, deferred until the Scheme pays out (provided they are not conditional on the Scheme paying out).
- The Direction is completely silent on annual leave.
Bounce Back Loans Scheme (BBIL)
The Bounce Back Loan Scheme (BBLS) provides financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak and that can benefit from £50,000 or less in finance.
The scheme is a part of a wider package of government support for UK businesses and employees. Read more at the Government’s Business Support website.
BBLS is available through a range of British Business Bank accredited lenders and partners, listed on the British Business Bank website.
A lender can provide a six-year term loan from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000.
The loans gives the lender a full (100%) government-backed guarantee against the outstanding balance of the facility (both capital and interest). The borrower always remains fully liable for the debt.
Key Features of the Scheme
|Finance up to £50,000
||100% Guarantee to lender to encourage them to lend
||Government pays interest and fees for 1st 12 months
||Affordable interest Rate
|Loans range from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000.
||The scheme provides the lender with a full (100%), government-backed guarantee against the outstanding balance of the finance (both capital and interest).
The borrower remains 100% liable for the debt.
|The Government will make a Business Interruption Payment (BIP) to cover the first 12 months of interest payments.
The borrower does not have to make any repayments for the first 12 months.
|The interest rate for the facility is set at 2.5% per annum, meaning businesses will all benefit from the same, affordable rate of interest.
||No guarantee fees for lender or business
|The length of the loan is six years but early repayment is allowed, without early repayment fees.
||Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle).
||There is no fee to access the scheme for either businesses or lenders.
How Business Can apply
Find a lender – View and select a BBLS accredited lender
You should approach a lender yourself, ideally via its website.
In the first instance, you should approach your own provider. You may also consider approaching other lenders if you are unable to access the finance you require.
You will need to fill in a short application form online, which self-certifies that your business is eligible for a loan under BBLS.
If your business is eligible, it will be subject to appropriate customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks. Some state aid restrictions may apply to your application.
Note: There is high demand for finance through BBLS. Phone lines are likely to be busy and branches may not be able to handle enquiries in person.
The Lender Makes the Decision
The lender has the authority to decide whether to offer you finance.
Under the scheme, lenders are not permitted to:
- take any form of personal guarantee
- take recovery action over a borrower’s personal assets (such as their main home or personal vehicle)
If the Lender Turns you Down
If one lender turns you down, you can still approach other lenders within the scheme.
BBLS is designed to be fast for lenders to process and quick and easy for businesses to access. To help achieve this, you will only be required to fill out a short application form online.
Your business must be able to self‑declare to the lender that it:
- has been impacted by the coronavirus (COVID-19) pandemic
- was nota business in difficulty at 31 December 2019 (if it was, you must confirm your business complies with additional state aid restrictions under de minimis state aid rules)
- is engaged in trading or commercial activity in the UK and was established by 1 March 2020
- is notusing the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF), unless the Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility
- is notin bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance
- derives more than 50% of its income from its trading activity (this requirement does not apply to charities or further-education colleges)
- is notin a restricted sector (see below)
Bounce Back Loans are available to businesses in all sectors, except the following:
- Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive)
- Insurance companies
- Public-sector organisations
- State-funded primary and secondary schools
Coronavirus Business Interruption Loan (CBILS)
According to British Business Bank (government owned) the loan scheme should be available this week (commencing 23 March 2020). The loans will be provided by the British Business Bank through participating partners. For example in the North West there are 20 partners who can provide term loans which includes the main banks, asset backed lenders, investment funds plus secondary lenders such as Newable.
The scheme provides the lender with a government-backed guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. NB – the borrower always remains 100% liable for the debt.
The Government will also cover the first 12 months of interest payments, so businesses will benefit from lower initial repayments. The business remains liable for repayments of the capital. The maximum value of a facility provided under the scheme will be £5 million (the original announcement suggested a maximum value of £1.2 million.)
Eligibility for CBILS
To be eligible for CBILS the small business must be:-
- Be UK based, with turnover of no more than £45 million per annum
- Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support or subject to limitations – see below)
- Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years
- Be unable to meet a lender’s normal lending requirements for a fully commercial loan or other facility, but would be considered viable in the longer-term
Full eligibility criteria will be published when the scheme goes live w/c 23 March 2020
Finance terms are from three months up to ten years for term loans and asset finance and up to three years for revolving facilities and invoice finance.
To apply for an CBILS-backed facility, businesses may wish to consider approaching one or more participating lenders to discuss their borrowing needs. More information is available at smallbusiness.co.uk
There are sectors such as banks, primary and secondary schools who are not eligible. Other sectors will have restrictions such as growing or crops, fishing, mixed farming and transport who will have restrictions on the amount they can borrow. This appears to be work in progress.
Cash Flow support through tax system
All businesses will have the next quarter’s VAT payments will be deferred. That means no businesses will have to make any VAT payments which fall due in the quarter to end of June 2020. They will then be able to pay the arrears that have accrued over the next 9 months to 5 April 2021.
Abolishing of business rates
Businesses in the hospitality, leisure and retail sectors will have no business rates to pay for the 20/21 rates year.
Cash Grants for Small Business Properties
On 17 March, the chancellor announced an increase in the small business coronavirus cash grant of up to £10,000. Those who qualify for Small Business Rate Relief (SBBR) or Rural Rate Relief will be able to get the funding.
The Department for Business, Energy & Industrial Strategy will be working with local authorities to outline the scheme and encourage local authorities to prepare.
However, once up-and-running, your local authority will contact you rather than having to apply yourself. Grant money will not be available until early April. There is helpful information on small business.co.uk about the grants. This only applies to businesses in England.
There will be a £25,000 grant available to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000. Properties that will benefit from the relief will be buildings that are wholly or mainly being used:
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
for assembly and leisure
- as hotels, guest & boarding premises and self-catering accommodation
You won’t need to take any action – the relief will be applied to your next council tax bill in April 2020. However, the government warns that the local authority may have to reissue your bill immediately to exclude the business rate charge. They’ll do this as soon as possible.
Help for Self Employed
There are 5 million self employed workers who desperately need financial help. Rishi Sunak, the Chancellor announced on Thursday 26 March 2020 that self employed businesses and partnerships who have suffered a loss in income, will be eligible for a taxable grant a taxable grant worth 80% of their profits up to a cap of £2,500 per month.
Initially, this will be available for three months in one lump-sum payment, and will start to be paid from the beginning of June.
It will be called the Coronavirus Self-employment Income Support Scheme, and is open to those who were trading in the last financial year, still trading now, and planning to continue doing so this year. Those who are recently self-employed and do not have a full year of accounts will not receive any help under this scheme.
Additional help available to self employed includes:-
- The deferral of self-assessment tax requirements – June 2020 payments would be deferred for 6 months,
- Deferral of VAT payments due in the quarter to June 2020 which would then need to be cleared over the 9 months from 1 July 20 to 5 April 2021.
- Payment holidays for mortgage payers
- Abolition of business rates for self employed operating businesses in the retail, leisure and hospitality sectors
- Cash grants as detailed above if self employed businesses qualify Small Business Rate Relief (SBBR) or Rural Rate Relief will be able to get the funding.
- Plus the strengthening of the welfare “safety net”.
Despite calls for the government to make available SSP for self employed, the Government has decided to support them via the benefits system.
Should they fall ill, they will be able to claim employment and support allowance (ESA) and/or Universal Credit. The weekly payment for ESA is typically £73.10 or £57.90 for people under the age of 25.
However Chancellor Rishi Sunak has said that he is raising the payments for Universal Credit so that the self-employed receive the same amount as someone on statutory sick pay (£94.25 a week).
Universal credit: who is eligible and what do you get?
Universal credit may be available to you if you’re on a low income or out of work. You receive a standard allowance plus extra if you have children or a health condition that prevents you from working or if you need help paying your rent.
The standard monthly payment is £317.82 if you’re single and over the age of 25 and £251.77 if you’re single and under 25.
Couples get either £498.89 or £395.20 between them depending on whether they are over or under 25. The government has provided more information at https://www.gov.uk/self-employment-and-universal-credit
Employment Support Allowance
New style’ Employment and Support Allowance will be payable for people directly affected by Covid-19 including those self-isolating according to government advice from the first day of sickness, rather than the eighth day.
You can apply for Employment and Support Allowance (ESA) if you have a disability or health condition that affects how much you can work.
ESA gives you:
- money to help with living costs if you’re unable to work
- support to get back into work if you’re able to
You can apply for ESA if you’re employed, self-employed or unemployed.
If you are not sure about benefits you will be entitled to there are very helpful benefit calculators available.
- Turn2us– for information on income-related benefits, tax credits, Council Tax Reduction, Carer’s Allowance, Universal Credit and how your benefits will be affected if you start work or change your working hours
- Policy in Practice– for information on income-related benefits, tax credits, contribution-based benefits, Council Tax Reduction, Carer’s Allowance, Universal Credit, how these are calculated and how your benefits will be affected if you start work or change your working hours
- entitledto– for information on income-related benefits, tax credits, contribution-based benefits, Council Tax Reduction, Carer’s Allowance, Universal Credit and how your benefits will be affected if you start work
There are also a range of measures that have been introduced to help individuals manage their finances which we have detailed in our blog – Your personal finances and dealing with the affects of Coronavirus
Business Debt Help
There are a range of solutions available to businesses that are struggling apart from the measure outlined above.
Informal Payment Arrangements/Formal Arrangements – Company Voluntary Arrangements, Partnership or Individual Voluntary Arrangements
If you business is able to tick over in terms of covering wages and overheads but is struggling to pay suppliers in full, it is possible to put forward payment arrangements to creditors either in an informal arrangement or using Voluntary Arrangements for companies, partnerships or self employed businesses.
Voluntary Arrangements allow the business to retain its assets and continue trading but allows payments to unsecured creditors to be reduced so the business pays a monthly contribution towards its debt. The payments go into the arrangement and these funds are passed onto creditors by way of periodic dividends – usually quarterly.
Administration is an option for a company facing financial strain or creditor pressure. In many cases, a company which enters Administration can preserve the core business, and maintain continuity with its customers, and staff.
A company in Administration is legally protected from the commencement (or continuation) of any action against it. This protection provides ‘breathing space’ and gives the company’s Board time to put together a plan of action which could include restructuring, assessment of cash-flow and future plans, or even marketing the business for sale.
A sale of the business can be agreed before the Administration. This is widely known as pre pack administration and involves a sale to (all, or a number of) the existing directors operating a newly formed company. In any case, a sale of the business must be viable and a buyer will need to demonstrate that the newly formed company has a good prospect of success.
A CVL is likely to be the most suitable option if a company has debts it cannot afford to repay and there is no longer a viable business to be saved. Unfortunately there are so many companies at the moment with their businesses struggling with limited trading or shutdown completely. Hopefully, the lifelines strategies detailed above will help you keep your business ticking for the next few months whilst the nation aims to keep themselves safe.
If you have any queries please fill out our Contact Form and we will be in touch. Alternatively, call our FREE ADVICE LINE on 0800 781 0990. Our team has extensive experience in dealing with solvent and insolvent businesses and can arrange an initial consultation at no cost, usually on the same day.