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Loans, grants and furlough: accessing COVID-19 support

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    Melissa Tredinnick

    Melissa Tredinnick UKBF Regular Staff Member

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    It’s hard to believe we’ve come to the end of April already. 

    A month into lockdown, most people have experienced both the stress and the boredom it brings, navigated their way around working from home or operating their business under the limits of social distancing, and read the words “unprecedented” and “uncertain” more times than they can count. 

    Businesses are feeling the impacts of COVID-19 differently, with the Office for National Statistics reporting 10.4% growth in the volume of sales for food and non-store retailing in March 2020, compared to a dramatic 34.8% drop for clothing stores. 

    Since mid-March, the Government has announced several support schemes for businesses that are struggling as a result of the virus, although some measures have seen more success than others.

    The British Chambers of Commerce published its latest coronavirus business impact tracker this morning (29 April), showing that while 76% of firms had furloughed a portion of their staff, a minority had successfully applied for finance under the coronavirus business interruption loan scheme (CBILS).

    In response to surveys conducted between 22 and 24 April, 57% of business owners said they did not intend to apply for CBILS or any other form of finance.

    Only 13% of those who had applied had been successful, with others still awaiting a decision or having had their application rejected.

    The Government seems to have provided the solution to this, in the form of a new microloans scheme that’s set to launch on 4 May, with lower barriers for application and a 24-hour turnaround. 

    The announcement was largely welcomed here on UKBF, although concerns remain around the potential for abuse of the scheme, as well as businesses’ ability to repay it in the long-term.

    As user Mark T Jones put it, “there isn’t a perfect solution but I’d say this is as close as it gets”.

    Accessing a Government-backed loan

    The Government website currently lists three main support schemes available to small and medium-sized businesses: CBILS, bounce-back loans, and the future fund.

    CBILS offers loans, overdrafts, invoice finance and asset finance of up to £5 million, for businesses with an annual turnover of up to £45 million. 

    It’s delivered through commercial lenders, with the Government offering a guarantee of 80%. You can find more details and apply for a loan through the British Business Bank.

    The bounce-back loans scheme offers smaller loans, but with the promise of a much faster turnaround and no requirement for businesses to prove their future viability.

    Small businesses can apply for microloans of 25% of their turnover, up to a £50,000 maximum. The Government will pay 100% of the interest for the first 12 months. You’ll be able to apply for this scheme from 9am on 4 May.

    A third option, the future fund, is aimed at innovative businesses that are not eligible for other support schemes, but have already proven their ability to raise equity investment. 

    It will provide Government loans ranging between £125,000 and £5m, for companies that can source at least equal funding from private investors. 

    This scheme is set to open in May, and you can find more details here.

    Furloughing your staff through the job retention scheme

    This option has had high take-up among business owners, with more than 500,000 claims made through the newly-opened portal so far. 

    That’s good news for employees, who are able to keep their jobs even while the crisis prevents them from working, and for business owners, who can claim back 80% of furloughed employees’ usual wages up to £2,500.

    It’s also been expanded since it was first announced, with the cut-off date moved to 19 March, and the length of the scheme extended to the end of June.

    But as yet, it’s unclear what will happen when that period comes to an end, and whether another extension or an alternative solution will be put in place.

    Accessing small business grants

    Certain small businesses in England have been promised grants of either £10,000 or £25,000, under two different schemes: the small business grant fund and the retail, hospitality and leisure grant fund.

    Councils have so far distributed more than half of the funds, but 344,698 businesses have not received their grant – about a third of the total number identified as eligible.

    Unfortunately for those businesses, there’s little they can do at the moment other than wait to be contacted by their local council.

    Getting support if you’re self-employed

    Self-employed people will be able to claim a taxable grant worth 80% of their profits, up to £2,500 a month. 

    This is calculated based on their average trading profit over the tax years 2016/17, 2017/18, and 2019/20. If they had not submitted a self-assessment return for those years, it will be based on their profits over shorter continuous periods.

    The scheme does not include company directors, who are instead being advised to put themselves on furlough and claim back 80% of their salary through the coronavirus job retention scheme.

    HMRC will contact those who are eligible for self-employment income support in mid-May, and payments are expected to be made by early June.

    If you’re not sure what kind of support your business can access, you can find out here.

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