(And updated Wednesday 15th April 2020)
In this article we pull together the key things you should be thinking about as you steer your business through these uncharted waters.
Time and again, we have seen that it is rarely sensible to implement rash decisions.
You should do what is necessary to mitigate the effects of Coronavirus on your business in a considered manner – your focus now should be on “steadying the ship”.
We have distilled what we see as the relevant, key support available, giving you a brief synopsis of each scheme and then provided links to other sources.
As the situations is so fluid, we are working closely with our partners and will signpost to them, where appropriate; they have teams pouring over the detail on a daily basis.
Current Coronavirus Government Support Schemes
BORROWING MONEY
- Coronavirus Business Interruption Loans Scheme (CBILS) – this is an extension of the Enterprise Finance Guarantee which in itself was not particularly easy to access. It has been extended but there is still a load of questions. It is offered through The British Business Bank’s (BBB) 40+ accredited lenders. There is a lot of debate on the taking of personal guarantees – for an interesting thread, click here. On 2nd April 2020, it was announced that lenders will not take personal guarantees for loans up to £250k. And on 9th April a further 8 lenders were added to the BBB’s list including Coutts and OakNorth.
Tectona Comment: There is now no guarantee fee for SMEs to access the scheme. Interest and fees paid by the Government for 12 months
- Covid-19 Corporate Financing Facility – A scheme facilitating the purchase of short term debt for larger businesses.
GRANTS (which will be taxable)
- Coronavirus Job Retention Scheme – This is a Grant (not a loan) and all UK employers who have a PAYE payroll scheme can claim this. HMRC will reimburse 80% of furloughed workers’ (employees that would otherwise have been laid off) wages up to a max of £2,500 per month. On 9th April it was reiterated that furloughed workers cannot work for the business while on furlough. It is best to budget for claims to be actually received from late May onwards and you will need to carefully consider cash flow in the meantime. Gov.uk information can be found here.
Tectona Comment: The entire grant (with no deductions whatsoever) must be paid to the employee
Tectona Comment: Employers can rotate furloughed workers – providing each employee is furloughed for a minimum of 3 consecutive weeks
Tectona Comment:If you made any staff redundant after 28th February 2020 you can rehire them and then furlough them; this means that key staff can be kept on “hold” ready for the good times which will come …
Tectona Comment: Shareholder directors can claim only the PAYE element of their income; there is no provision for to cover the dividend income
- Self Employed Income Support Scheme – HMRC will pay 80% of average monthly profits over the last 3 years. Unlike the employee scheme above, the self-employed can continue to work and receive support
- Support for the Self Employed – various including deferral of income tax payments on account until January 2021
- Small Business Grant Fund – Provides a one off grant of £10,000 as a business rates holiday for 12 months
Tectona Comment – the one category that is not currently supported are company owners who have minimised their entrepreneurial risk by paying themselves by way of dividend rather than a proper salary
DEFERRING LIABILITIES
- Time To Pay Arrangements (TTP) – allowing deferral of payment of taxes (PAYE/ NIC/VAT) and suspension of debt collection proceedings
- Suspension of VAT – until the end of June 2020. Tectona comment: if you pay VAT by direct debit you will need to cancel the DD – else HMRC will collect your money and no repayments will be made.
- Deferral of self-assessment tax payments – On account payments due on 31 July 2020 will be automatically deferred to January 2021
- Deferral of payment of rent – You can apply to your landlord for a 3 month payment holiday; your landlord will not be able to evict you for non-payment of rent. As always, start a dialogue with your landlord.
For each of the headings there is robust and regularly updated information on the James Cowper Kreston website.
What should I be doing now?
Cash is going to be absolutely vital. So you should be doing scenario planning almost on a daily basis.
We suggest that you look at a very worst case position – remember to consider the cash constraints on your customers too – and put in place strategies to accommodate.
Tectona are here to help you. Our team walk you through how to Scenario Plan and can help you with the coping strategies and explore the funding options available to you, including help you through the maze of government Coronavirus support announced.
Contact the Tectona team so that we can help you work through your options.
About Tectona
Tectona Partnership helps business owners sleep at night by embedding one of our 15 commercial finance directors in your management team. Very often, a part time solution is usually the most effective for small businesses. We make sure you have the necessary management information and strategic insight to make informed decisions and will tell you what you need to know, when you need to know it.