Last Updated: 10am - Monday 4th May 2020
The COVID-19 coronavirus pandemic has affected lives and livelihoods across the globe and hundreds of thousands of UK businesses are bracing themselves for its impact not only in the long-term but with immediate effect.
Many companies, partnerships, and sole trader businesses simply do not have the financial breathing space to manage an emergency cash flow situation – and this is the threat that COVID-19 is posing to businesses across the country in a wide variety of industries and sectors - particularly since the UK entered lockdown on March 23rd.
So how can your business cope from the imminent financial impact of this coronavirus?
Talk to your business support network
- Your business insurance might provide the cover you need if your business has to stop trading indefinitely. Check your policy wording as you might have Business Interruption cover in your commercial insurance policy – speak to your insurer if you’re not sure. Once you have confirmed that you have Business Interruption cover, you will need to check whether you have an extension for “notifiable diseases”.
- Talk to your bank about possible emergency finance options. The British Business Bank has set up the Coronavirus Business Interruption Lending Scheme (CBILS) which will provide your lender with a government-backed 80% guarantee against the outstanding facility balance – so in reality all eligible businesses should be able to get access to funds although we have heard of many businesses struggling to get approval. CBILS was originally going to provide loans of up to £1.2m but this maximum loan amount has now been increased to £5m. Banks will not be permitted to request personal guarantees for loans under £250,000.
- In addition to the CBILS - and following some teething problems with the scheme - the government unveiled its Bounce Back Loan Scheme - also known as its micro-loan scheme, specifically to help the UK's small businesses. Capped at £50,000, businesses will be able to apply for a loan worth up to 25% of turnover. No interest will be payable for the first 12 months and the entire loan will be backed by the government. The scheme opened on Monday 4th May.
- For the self-employed, there's help available too - based on specific criteria. The Self-Employed Income Support Scheme (SEISS) will allow you to claim a taxable grant of 80% of your average monthly trading profits, paid out in a single instalment covering 3 months, and capped at £7,500 altogether. This is a temporary scheme, but it may be extended. To find out more, click here.
- Take advantage of other government measures such as VAT deferrment - the next quarterly VAT payment will be deferred for businesses, and also the extended HMRC Time to Pay Scheme which gives businesses additional breathing space when settling their tax bills including VAT, PAYE, and Corporation Tax.
- Ask your customers – particularly larger companies – to pay your outstanding invoices. Morrisons supermarket have led the way with this by paying 3,000 suppliers instantly, regardless of payment period. Small businesses or the self-employed with invoices issued should use this moment to chase for instant payment.
- Talk to the Government through their business support helplines, of which some are dedicated to coronavirus. They are designed to help small businesses with advice on how to minimise/cope with the impacts of coronavirus. The phone number is different depending on your business location:
England: 0300 456 3565
Scotland: 0300 303 0660
Wales: 0300 060 3000
Northern Ireland: 0800 181 4422
- Ask your landlord for some breathing space if you’re experiencing a drop in trade which is impacting on your ability to pay the rent. Landlords might take a generous approaching in these extenuating circumstances by providing rent breaks and/or payment discounts.
Get free professional advice
- Take time to understand the options available to you and your business if cash flow worsens and the business becomes insolvent; that means there isn’t sufficient funds to pay bills as and when they fall due – such as suppliers and HMRC. Speak to one of our licensed insolvency practitioners completely free of charge and find out what options might be available to you.
- Talk to a ‘Time To Pay’ specialist that can defer your tax payments to HMRC. When cash flow problems arise, companies often struggle to pay corporation tax, VAT, and/or PAYE on time. Thankfully, HMRC has already announced that they are waiving late payment penalties and interest for missed tax payments, but you should make every effort to get Time To Pay in place rather than assuming the Revenue will provide automatic breathing space. Our specialist HMRC Time To Pay team can negotiate on your behalf and have an exceptional track record in cementing more palatable payment terms between UK businesses and the taxman.
- If your business is experiencing a downturn in trade, restructuring your business operations could provide more time going forward to get back on your feet. Mitigating losses is key in times of financial distress so take advice on which parts of your business could be streamlined or cut back. Look into subscriptions and contracts that you could do without at the present time.
- There are also formal procedures available to companies in the form of a Company Voluntary Arrangement (CVA) which shield businesses from creditor pressure and allow them to settle unpaid debts over time. A CVA is a type of restructuring procedure and can sometimes lead to Administration which protects a company and its creditors from further losses and aims to resurrect the business and ensure continuation of trade and employment.
- Emergency funding can help businesses navigate through troubled waters. There are many different funding options available and we can provide free advice in this regard - some which will require a form of security and others simply provided as an old-fashioned capital loan. Bridging loans will be highly-sought after in the coming months. Overdrafts can often be extended. Invoice factoring is a key solution for businesses looking to recover outstanding invoices – typically at around 80-85% of their value. And there’s the Coronavirus Business Interruption Lending Scheme which has now been extended by the Government so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance to keep operating during this difficult time. The Government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals. The Government will continue to cover the first twelve months of interest and fees.
- Directors should also take extra care not to create individual financial exposure through overdrawn directors’ loan accounts and late payments that can breach personal guarantees. It is common for business owners to take money out of a company with the intention of paying it back later in the year – but these unforeseen circumstances may have thrown a huge spanner in the works which could lead to not only corporate insolvency concerns but also personal insolvency problems, e.g. possible bankruptcy and/or IVAs. We have a designated director liability advice team who can provide free guidance to company directors concerned about their individual position.
- If cash flow really does begin to bite due to COVID-19 and your business is served with non-payment notices such as CCJs, statutory demands, or in the most serious situation – a winding-up petition – you should seek free advice from a licensed insolvency practitioner. These formal notices are often a precursor to liquidation and time is of the essence.
- And finally – if the regrettable situation of insolvency arises and your company has no option but to liquidate, company directors can get a free assessment for possible director redundancy pay of which the average payout is around £9,000.
Free business rescue and recovery advice from Begbies Traynor
If you would like specialist advice on any aspect of business rescue, turnaround, or possible recovery methods, the experts at Begbies Traynor are here to provide free advice and support. For a free confidential discussion with one of our experts advisers call us on 0333 009 6852.
UK businesses are facing a challenge like no other; the COVID-19 coronavirus presents a huge threat to livelihoods across the country starting with sectors that are consumer-facing such as the events industry, leisure industry, and many more. Business distresss is accelerating on an unprecedented scale and taking swift action to arrest a business' decline is absolutely critical. Our partner-led service provides a free director consultation and should you wish to meet face-to-face, we have a network of 78 UK offices ensuring you're never far away from emergency business support.
The COVID-19 outbreak presents a constantly moving picture and information and advice from Government can change very quickly. For all the very latest Government information on COVID-19 and guidance for businesses, please visit the UK Government website, the Scottish Government website, the Welsh Government website or the Northern Irish Government website.
The information above is kept under continuous review and is updated daily.