There is life after furlough. What financial help is available for your UK business?
Numerous pundits are predicting the imminent end of the coronavirus pandemic. But the reality is that for a large number of businesses across the UK it’s certainly not the end: to paraphrase Winston Churchill, it is more like the end of the beginning.
With the government’s business protection schemes either being gradually wound down or ending (including furlough and SEISS), many companies are now looking for new sources of financing.
For others, debts need to be repaid, and this will involve some re-engineering of the business, including cutting costs.
The Recovery Loan Scheme (RLS)
The Recovery Loan Scheme, launched on 6 April 2021, makes financial help available for any UK business as they look to recover from the financial impact of the pandemic. The scheme is managed and operated by the British Business Bank.
The RLS was set up to help companies of any size access loans, with up to £10 million available per business. The actual amount offered and the terms are at the discretion of the accredited participating lenders.
While the government guarantees 80% of the loan, giving a safety blanket to lenders, it is vital to remember that the borrower is always 100% liable for the debt. The scheme is open until 31 December 2021, subject to review.
You can apply for a loan if your business is trading in the UK. You need to show that your business:
- would be viable were it not for the pandemic.
- has been adversely impacted by the pandemic.
- is not in collective insolvency proceedings.
You can get:
- term loans or overdrafts of between £25,001 and £10 million per business.
- invoice or asset finance of between £1,000 and £10 million per business.
The maximum length of the loan depends on the type of finance you apply for: it is up to three years for overdrafts and invoice finance facilities, and up to six years for loans and asset finance facilities.
You can use the finance for any legitimate business purpose – including managing cashflow, investment and growth.
If your business has already borrowed from any of the other coronavirus loan schemes – the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) or the Coronavirus Large Business Interruption Loan Scheme (CLBILS), you can still apply for an RLS loan.
However this may, in certain circumstances, limit the amount you can borrow under RLS. If you’re borrowing £250,000 or less, the lender won’t take any form of personal guarantee. If, however, you’re borrowing more than £250,000 then the lender has the discretion to decide whether to take a personal guarantee. However:
- above £250,000, the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied.
- no personal guarantees can be held over Principal Private Residences.
Pay As You Grow
Originally announced by the Chancellor of the Exchequer in September 2020, Pay As You Grow (PAYG) enables businesses that have started repaying their Bounce Back Loans to:
- request an extension of the loan term to 10 years from six years, at the same fixed interest rate of 2.5%.
- reduce the monthly repayments for six months by paying interest only. This option is available up to three times during the term of their Bounce Back Loan.
- take a repayment holiday for up to six months. This option is available once during the term of their Bounce Back Loan.
These options can be used individually or in combination with each other. You should be aware that you will pay more interest overall if you use one or more of these options, and that the length of the loan will increase in line with any repayment holidays taken.
Businesses first began to receive BBLS loans in May 2020 and the first repayments will became due from May 2021 onwards.
Lenders will advise you about the terms and conditions of your repayment options. As the borrower you will remain responsible for repaying your Bounce Back Loan and are fully liable for the debt.
Using Pay As You Grow will not, in principle, affect your business’s ability to obtain finance in the future. Pay As You Grow is designed to alleviate your financial difficulty, even before it arises, by giving you flexibility in meeting your repayment obligations.
Using the scheme will not affect your credit rating, but it may influence lenders’ future credit worthiness assessments. For example, when considering a request for additional funding a lender will take into consideration your incomings and outgoings, including existing debt repayments such as the Bounce Back Loan Scheme facility. It will also consider your total debt exposure, which will again include the outstanding Bounce Back loan.
A trusted business advisor, or business rescue specialist, will be able to guide you through the process.
Additional Restrictions Grants
Additional Restrictions Grant (ARG) is financial help available for any UK business not eligible for other grant schemes or where additional funding is needed.
Under the ARG scheme, the government provides local authorities with grant funding to support businesses that have been severely impacted by the pandemic, and that may or may not be in the business rates system.
Local councils can determine which businesses to support and determine the amount of funding provided from the ARG scheme.
Local councils are encouraged by government to support firms from all sectors that may have been severely impacted by restrictions but are not eligible for the Restart Grant scheme, including those that do not pay business rates.
You cannot get funding if your business is in administration, insolvent or has been struck off the Companies House register.
A new domestic subsidy allowance for the Covid-19 business support grants took effect on 4 March 2021.
- Small Amounts of Financial Assistance Allowance – you’re allowed up to £335,000 over a period of three years.
- Covid-19 Business Grant Allowance – you’re allowed up to £1.6 million.
- Covid-19 Business Grant Special Allowance – if you have reached your limits under the Small Amounts of Financial Assistance Allowance and Covid-19 Business Grant Allowance, you may be able to access a further allowance of funding of up to £9 million, provided certain conditions are met.
Grants under these three allowances can be combined for a potential total allowance of up to £10,935,000.
For more information check out your local council’s website to find out how to apply.
HMRC Time to Pay
If you owe HMRC any outstanding tax, then it might be worth taking advantage of the Revenue’s Time to Pay initiative. Basically, a Time to Pay Arrangement is a repayment plan that spreads out the cost of what you owe, giving you extra time to pay – usually between six and 12 months.
You need to contact HMRC directly to set up your repayment plan, which can cover corporation tax, VAT and PAYE. For more check out HMRC’s Business Payment Support Service or call the helpline (0800 0159 559).
HMRC also has a helpline specifically for the self employed and businesses that are struggling due to the pandemic. When you speak HMRC you’ll need to explain how you can repay the tax owed over the proposed timescale.
Your trusted business advisor will be invaluable here, as you’ll have to create a business plan for the next six to 12 months, including a cash flow forecast.
HMRC can decline a request for a Time to Pay arrangement if they think the repayments schedule in unrealistic, and that you can’t afford to pay back what you have promised in full and on time.
Your proposals should be supported by evidence that these payments can be met, for example your sales and cash flow forecasts and examples of how and where you can cut costs (if appropriate).
Similarly, HMRC may also refuse you if you have a history of late payment of taxes, or you are in a particularly high-risk sector. Again, your trusted advisor will be able to help you state your case convincingly.
If you are looking to grow your business, and want to employ more staff, then the Kickstart scheme provides a cost-effective way of doing so. The Kickstart Scheme provides funding to create new jobs for 16 to 24 year olds on Universal Credit who are at risk of long-term unemployment.
In return you’ll get £1,500 funding per job. This should be spent on setup costs and supporting the young person to develop their employability skills.
Employers of all sizes can apply for funding which covers:
Employers can spread the job start dates up until 31 December 2021. You’ll get funding until 30 June 2022 if a young person starts their job on 31 December 2021.
Further funding is available to provide support so that young people on the scheme can get a job in the future.
You can apply for a Kickstart Scheme grant online yourself or through a Kickstart gateway that is already working with the Kickstart Scheme. They will act as an intermediary and apply for funding on your behalf.
Find a Kickstart gateway by using this link.
The jobs created with Kickstart Scheme funding must be new jobs. They must not replace existing or planned vacancies, or cause existing employees, apprentices or contractors to lose work or reduce their working hours.
The jobs must be a minimum of 25 hours per week, for six months and require only basic training.
If you need help understanding what financial help is available for your UK business, securing new finance, or if you need to restructure to make your business fit-for-purpose going forward, then you really need the help of a trusted advisor or business rescue specialist.
As industry leading experts with 40 years’ experience, we’re in the