The financial impact of the ongoing Covid-19 epidemic is just beginning to be felt by small businesses in the UK, but there are options available for business owners looking for ways to protect themselves from lost productivity and revenues. In this article, we'll summarise some of the main sources of financial assistance, who can access them, and how to go about it. We will continue to update this page as a rolling resource for our community as the situation continues to change and more details are made available. Updates for the week commencing 18th May are highlighted in blue.
As always, the Sussex Innovation team are available to help our members with general advice, as well as supporting with applications that require financial information. Here's how you can book an initial phone consultation with our team - please let us know what support would be most useful to you and your business:
- For strategic reviews and crisis management - Nigel Lambe
- For cash flow and tax questions - Jane Baker
- For advice on keeping sales revenue healthy - Simon Chuter
- For advice on managing pressure, maintaining team morale and wellbeing - Claire Pasquill
- For technical advice and support with remote working tools - Chris O'Hare
- For advice on maintaining communication with staff and clients - Joseph Bradfield
- For seeking working capital and investment - Laurence Grant
- For advice on business pivots and modelling new business opportunities - Peter Lane
- For any other issues not addressed above - Helena Jevons [Helena can also connect you with advisor Monica Beckles, for information on employment law and HR management]
Local Authority Discretionary Grants Fund
On 13th May the government confirmed a new discretionary grant, designed to reduce the impact of the lockdown on small businesses unable to claim against the earlier Small Business Rate Relief grants. Decisions on how to allocate these grants will be taken by local authorities, with guidance published by central government here. Grants will take the form of a one-off payment of £25,000, £10,000 or less than £10,000, and local authorities are encouraged to exercise their own local knowledge in determining how they will be applied.
While nearly all Sussex Innovation members who have so far been unable to claim SBRR are eligible under the terms of the guidance as they stand, the specifics of how the grants will be allocated at local level are yet to be confirmed. We are in contact with Croydon Borough Council and Lewes District Council, and if we believe that you may be able to make a claim once the councils' plans are confirmed, we will be in touch with you directly.
Innovate UK Continuity Grants
If your business is currently receiving an award from Innovate UK and you expect to experience a funding gap as a result of Covid-19, you may be eligible for continuity grant funding of between £25,000 and £250,000. The scheme is open until 29th May 2020, followed by a longer continuity loan scheme, which may run until the end of the year. Advice on the various forms that grants may take, how the money is expected to be used, and how to apply can be found here.
Bounce Back Loan
On 27th April the Chancellor announced a new micro loan scheme, designed to enable small businesses to receive 25% of their turnover up to a maximum of £50,000, with the government paying any interest for the first 12 months. The loans will be available via the banks as of Monday 4th May, have limited eligibility criteria, and should be paid within 24 hours of approval. Visit your business bank's website for the standard form that is required to apply.
Coronavirus Job Retention Scheme
As announced in the Chancellor’s briefing on 20th March, all UK employers will be able to access support to continue paying part of their employees’ salaries in order to avoid lay-offs. HMRC will reimburse 80% of wages, up to a cap of £2,500 per month plus the employer's National Insurance and minimum automatic enrolment employer pension contribution, and based on the employee's actual salary before tax.
Fees, commission, bonuses and dividends cannot be included. All employers remain liable for National Insurance and pension contributions. You can claim for either the same month’s earnings from the previous year, or average monthly earnings from the 2019-20 tax year, whichever is higher. You can also choose to pay top-up salary in addition to the grant.
To access the scheme, you will need to designate affected staff as ‘furloughed workers’ and notify them of this change, then submit information to HMRC about these employees and their earnings through a new online portal. As existing systems are not set up to make payments directly to employers, the portal is not currently taking applications, but it is an urgent priority for HMRC to get this set up, and a claiming system is expected to be live by the end of April.
Any employer with a UK payroll and a UK bank account can claim against full-time, part-time, agency contract, flexible or zero-hour contracts – as long as these were previously paid via PAYE. The employee under furlough must have been employed and on your PAYE payroll (meaning that you must have made an RTI submission notifying HMRC of payment inrespect of the employee) on or before 19th March. The scheme also covers employees made redundant since that date, if they are rehired by their employer. If an employee has more than one job, they can be furloughed by each employer separately, and the cap applies to each employer individually.
The scheme also covers company directors paid via PAYE, provided that the business is temporarily ceased during the period of furlough and that the only work they undertake is related to their statutory duties as director. This should be recorded as a formal decision by the board, noted in company records, and communicated in writing to the director(s) concerned.
The scheme does not cover employees who undertake any work on behalf of the company while on furlough, employees hired after 28th February, or employees on unpaid leave. Employees currently on sick leave and receiving Statutory Sick Pay can be furloughed in order to access the scheme after this, and furloughed employees can take part in volunteer work or training, provided this does not provide services or generate revenue for the business.
On Friday 17th April, the Chancellor announced that the furlough scheme will remain open until at least the end of June. The government portal for processing claims went live on 20th April, and the link, as well as further guidance, can be found here. The deadline to make claims for receipt in April has now passed. In order to receive payment by the end of May, claims must be made before 22nd May.
A new government fund is set to launch in May, offering convertible loans of between £125,000 and £5 million for innovative start-ups and scale-ups. To be eligible for the loan, you must have raised at least £250,000 in equity investment over the past 5 years, and be able to source equal match funding from third party investors. More information about the fund and how to start preparing your application can be found here.
Finance for Charities and Social Enterprises
A £100m programme of loans and investment has been announced for charities, social enterprises and disadvantaged communities. The new measures include a Resilience and Recovery Loan Fund managed by Social Investment Business, and smaller emergency loans managed by the Community Investment Enterprise Facility. Both types of loan are available on a no fee, no interest basis for 12 months. Find out more about the programme via Big Society Capital.
Support for the Self-Employed
Financial support for the self-employed was announced on 26th March, and is similar to the terms laid out in the Job Retention Scheme. Self-employed and freelance workers will receive payments representing 80% of their average annual profits over the past three years, up to a cap of £2,500 per month.
To access the grant, you must have profits of less than £50,000, have filed a tax return for 2018/19, and more than half of your taxable income must come from self-employment. If you have not yet filed a 2018/19 tax return, you must file by 24th April. Otherwise, you do not need to do anything further in order for HMRC to arrange the payments on your behalf.
This funding will likely not come into effect until June, due to the difficulty involved in accessing detailed financial information for self-employed people, and the greater complexity involved in calculating a fair payment.
Statutory Sick Pay
Statutory sick pay for employees who are self-isolating can be paid from the first day of absence for up to 2 weeks, fully funded by the government. To be eligible, your business must have fewer than 250 employees and have kept detailed records of sick days to support the claim. No positive test or 'doctor's note' will be required. The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.
Deferment of Tax
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC's Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. You will need to provide reports illustrating your current financial position and forecasted financial challenges. Given the high volume of claims, it is likely that HMRC will be sympathetic to claims for extended credit.
It was announced on 20th March that all VAT payments will be deferred for 3 months, until 30th June 2020. No application is required, and taxpayers will be given until the end of the 2020-21 tax year to pay any liabilities that have accumulated during the deferral period. If you are self-employed, income tax self-assessment payments due on 31st July 2020 will be deferred until 31st January 2021.
VAT returns should be prepared and submitted as usual, and businesses that wish to defer their payment should cancel any direct debits through their banks in good time before the due date. Businesses that are due repayments will receive them as normal.
If you are concerned about being able to pay your tax due to Covid-19, call HMRC’s dedicated Time to Pay helpline, which has now changed to 0800 024 1222.
Small Business Rate Relief
Businesses currently eligible for Small Business Rate Relief (SBRR) have received £10,000 from the Small Business Grant Fund. If you are a tenant of either Sussex Innovation site and eligible for this grant, your payment should have been processed during the second half of April. If you believe that you are eligible and have not yet received payment, please contact our Accounts team.
There is a range of support available to businesses affected by government-ordered closures, primarily in the hospitality, retail and leisure sectors.
Businesses that have cover for both pandemics and government-ordered closure should be covered by insurance, as the government and insurance industry confirmed on 17th March that official advice to avoid hospitality and retail venues is sufficient for these businesses to make a claim. Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.
Additionally, all companies affected by closures will be exempt from business rates for the whole year, and one-off cash grants of £25,000 will be provided to help meet ongoing business costs. Funds will be managed by local authorities, who will contact businesses directly rather than taking applications.
Coronavirus Business Interruption Loan
The government announced they will guarantee £330 billion of bank loans to firms to stop them from going bankrupt during the coronavirus outbreak. This support is intended for both large and small businesses struggling to pay items such as rent, salaries, suppliers or purchase stock. If demand is greater than £330 billion, more will be made available.
The support takes the form of a government-backed loan or credit on attractive terms. The scheme also covers asset finance and invoice finance.
This scheme supports SMEs to access bank lending and overdrafts of up to £5m from more than 40 lenders, including the 'big four' banks - Barclays, HSBC, Lloyds and RBS. Interest rates are similar to lending prior to the outbreak, with the government guaranteeing 80% of each loan and giving lenders more confidence in approving credit decisions for small businesses that have insufficient security to meet the lender's normal requirements. Businesses can access the first 6 months of finance interest-free, as government will cover the first 6 months of interest payments.
In order to access the scheme, businesses should contact their finance provider. Full details including eligibility criteria are now available via the British Business Bank website.
We are hearing reports that some small businesses have been finding it difficult to secure loan approval – in general the scheme appears to be working for businesses that had a strong enough credit rating before the outbreak, but is not a likely source of finance for businesses that might be considered a risk by the banks.
The 'big 4' banks are no longer seeking personal guarantees on loans of up to £250,000, which may make them easier to access in some cases.
Funding Options is a resource backed by the British Business Bank to help businesses find finance suitable for their specific needs. If you decide that borrowing is the right step for your business at this time, they will help you to find the most favourable providers and terms, and help with your application.
Additional Bank Resources
- Barclays has launched a free telephone helpline offering support and information to its business banking customers. It is also providing repayment holidays.
- Lloyds has launched a £2 billion package to help minimise disruption to business operations. Support includes repayment holidays, and no arrangement fees for new or increased overdrafts, invoice discounting and finance facilities.
- NatWest has announced a £5 billion fund to support small and medium-sized firms to deal with the impact of coronavirus. Support includes the provision of working capital, loan repayment holidays and temporary emergency loans with no fees.
- Santander has outlined the support it is offering to customers impacted by coronavirus. Support includes a helpline and advice on managing finances.
- As a business with its UK operations based in Brighton, American Express is keen to support local businesses and charities - they are offering access to short term credit with no interest or APR, speak to our accounts team if you would like an introduction.
Coast to Capital Grants
The Local Enterprise Partnership for West Sussex, Brighton and Hove and East Surrey made £2m of grants available for local businesses with between 5 and 50 staff and turnover of less than £10m. These grants were available on a first-come, first-served basis to qualifying businesses, and have already all been claimed - we will update as and when any further funding is made available.
Coast to Capital is working with local and national government and liaising with business support organisations in the region to provide updates and access to information, as well as reporting issues back to government. Their Growth Hub Advisors are available to businesses for initial telephone discussions and signposting to specialist financial and other advice. They may also be able to fund a day’s specialist financial support. If you’re not sure who to contact, leave a voicemail on 01293 305 965, or email Coast to Capital or the Growth Hub.
This article contains a range of financing options, but every business' situation is different. If you are considering borrowing to support your business, it is important to consult with a qualified financial advisor who can advise on your position. If you'd like to talk directly to our accounts team for recommendations, referrals and pointers, please contact us via the community Slack channel or book a phone consultation using the details above.