As the COVID-19 crisis continues, the threat and inevitable negative impact is becoming more real for many small and medium-sized enterprises. Facing a massive drop in income in the coming weeks and months, particularly in consumer-oriented sectors such as retail, leisure and hospitality, most SMEs lack the financial means to survive. Without outside help, they will be forced to fire all employees and close doors of their company.
Whether you are a small company looking for ways to re-open your business or searching for capital to continue operations during these uncertain times, finding resources can be challenging. In this article, we are providing a few financial sources to small businesses to help you cope with this ‘new normal’ and access necessary aid during the crisis.
The Coronavirus Business Interruption Loan Scheme (CBILS) is created to provide financial support for small and medium-sized businesses affected by the coronavirus pandemic across the UK through a government lending guarantee. CBILS scheme offers two different kinds of funding, giving businesses that are losing revenue and facing their cash flow disrupted flexibility to decide what is best for their company. You can choose a hassle-free CBILS loan or opt for a flexible CBILS revolving credit facility backed by invoices of your company. Keep in mind that CBILS applications close in 27 days!
To apply for this lending solution, you need to be the director of a Limited Company, Limited Liability Partnership, or Public Limited Company registered in the UK. Also, you have to provide your latest statutory accounts, turnover, and net profit for 2019.
For a CBILS loan is required bank statements from 1 November 2019 up until 14 days before submitting the application. For a CBILS revolving credit facility, you will need bank statements for the last three months up to 30 days prior to application.
Coronavirus Job Retention Scheme
If you cannot keep your employees because your company has been affected by the coronavirus, you can furlough workers and apply for a Coronavirus Job Retention Scheme (CJRS) grant to cover wages on their temporary leave. CJRS grant from HMRC will pay 70% of an employee’s salary, up to a maximum of £2,187.50 a month while employers will pay 10% of wages for the time employees are being furloughed to guarantee they receive 80% (up to £2,500).
Employers should record affected staff as ‘furloughed workers’, which means they remain on the payroll, but they are not able to work for the company or charity. To support your claim for the grant and cover a portion of usual monthly wage costs of business, you will need to provide various information about your business and employees, including the claim period and the amount claimed, the number of employees being furloughed, employer PAYE reference number, UK bank account number and sort code.
The Future Fund ensures convertible government loans ranging from £125,000 to £5 million, provided at least equal match funding from private investors. The Future Fund is open for applications until the end of September 2020 for innovative UK companies with good potential that usually depend on equity investments and are currently are experiencing financing difficulties due to COVID-19.
Your business is eligible if it is a UK company that was incorporated on or before 31 December 2019. A non-UK parent company might also be eligible for the Future Fund if it satisfies special criteria. In case your business is a member of a corporate group, only the parent company is suitable.
Furthermore, the company must have raised no less than £ 250,000 in equity investments from outside investors over the past five years. It shouldn’t have any of its shares or other securities traded on a regulated market, recognised investment exchange, multilateral trading facility, or other listing venues. Half or more employees of the company must be UK-based, and a half or more revenues must be from UK sales.
Bounce Back Loan
The Bounce Back Loan System (BBLS) is designed to enable smaller businesses across the UK to access finance more quickly during the virus outbreak by borrowing between £2,000 and up to 25% of their business’ turnover. The scheme gives the lender 100% of the loan without fees or interest to pay for the first 12 months, and then 2.5% of interest rate per annum.
You can apply for a six-year term loan if you have a UK-based business that was established before 1 March 2020 and has been negatively impacted by the COVID-19. Companies from any sector can apply, excluding public-sector organisations, state-funded primary and secondary schools, banks, insurers and reinsurers (except insurance brokers).
However, you cannot apply if you are already claiming funding under the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS), or COVID-19 Corporate Financing Facility, unless the Bounce Back Loan scheme will refinance the whole of the CBILS, CLBILS, or CCFF facility.
In case you are self-employed, or a member of a partnership and your business has been adversely affected by crisis on or after 14 July 2020, you can use the Self-Employment Income Support Scheme (SEISS) to claim a grant. SEISS provides a taxable grant worth 70% of your profits paid out in a single instalment covering three months’ income up to a total of £6,750. To qualify for the SEISS grant, eligible individuals will need to apply for the second grant on or before 19 October 2020.
Besides essential criteria of being self-employed or a member of a partnership that have lost trading profits due to coronavirus, your average trading profit will be considered your total trading profits or losses for tax years 2016 to 17 + 2017 to 18, and 2018 to 19 divided by three for the purposes of SEISS grant. Your trading profits must be of less than £50,000 while more than half of your income should come from being self-employed.