Let’s Talk Business – COVID-19

Finance providers are experiencing an unprecedented level of telephone queries from customers.   Your finance provider will have plenty of information available on-line, so do go there first for any information you need.

The situation is changing by the day and we know many small businesses are having to adapt at high speed.  Access to finance and maintaining cashflow are only some of the issues you may have to work through, but it is important to consider any funding requirements early on.

Access to finance is only one of the issues you may have to work through, but it is important to consider any funding requirements early on.

Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme was announced by the chancellor on 11 March and has since been developed and extended to businesses with a turnover of up to £45 million.

The scheme has been designed to help businesses manage their finances given the unprecedented situation many are currently facing. It aims to support those SME businesses that were trading successfully before Covid-19 but which may now experience lost or deferred revenues, or disruptions to their cashflow as a result of the current disruption and those businesses whose growth requirements cannot supported under normal bank lending criteria.

CBILS can be used to support the provision of a number of different types of finance facility, including loans, overdraft, invoice finance and asset finance. 

More details about CBILS can be found here.

This scheme is just one of a number of measures announced by government, with new initiatives launched regularly.  Please visit  the gov.uk web site for the most up to date information here.

Banks and finance providers have the capacity and appetite to support viable businesses and a number of individual firms have announced various support packages. But it is still important that you contact them to discuss your specific needs at the earliest opportunity. There is also wide range of advice, guidance and finance options available to you.

The finance industry is here to help. The Let’s Talk Business campaign is advising businesses to:

  • Think about how your customers, suppliers and staff could be affected by Covid-19, so you are prepared for any potential impact.
  • Ask your bank or finance provider early on if you think you might need additional finance, or changes in your current arrangements. The earlier you engage the easier this will be.
  • Look into alternative finance options. Most applications are successful, but if your first choice doesn’t work out, there are many different providers and types of finance available.
  • Know where to go for more information to help your business. Use relevant guidance to consider what plans you should be making and actions you should be taking.

This guide is a starting point for businesses looking for assistance. UK government advice can be found here.

Questions you might have

I understand there are a number of initiatives to help businesses get the finance they need to manage the impact of Covid19. How do I access these?

A number of schemes are available.  These target different types of businesses and are delivered by different organisations, so please consider carefully which scheme might be best for your business.

Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme was announced by the chancellor on 11 March and has since been developed and extended to businesses with a turnover of up to £45 million. The scheme has been designed to help businesses manage their finances given the unprecedented situation many are currently facing. It aims to support those SME businesses that were trading successfully before Covid-19 but which may now experience lost or deferred revenues, or disruptions to their cashflow as a result of the current disruption and those businesses whose growth requirements cannot supported under normal bank lending criteria. CBILS can be used to support the provision of a number of different types of finance facility, including loans, overdraft, invoice finance and asset finance.  More details about CBILS can be found here.

This scheme is just one of a number of measures announced by government, with new initiatives launched regularly.  Please visit  the gov.uk web site for the most up to date information here

Tax support schemes

A a number of tax support measures are also available to SMEs.

HMRC has announced support for self-employed people and businesses that are having difficulty paying tax bills due to COVID-19.

A dedicated phone helpline is providing practical help for any business or self-employed person that has concerns.  HMRC will be able to consider specific circumstances to explore:

  • Agreeing an instalment arrangement
  • Suspending debt collection proceedings
  • Cancelling interest and penalties in cases where there are administrative difficulties contacting or paying HMRC immediately.

In addition, businesses in financial distress with outstanding tax liabilities may be eligible to receive support through HMRC’s existing Time to Pay service.  These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances.

You can reach the HMRC helpline on 0800 0159 559 or find out more here: https://www.gov.uk/government/news/tax-helpline-to-support-businesses-affected-by-coronavirus-covid-19

My business might need additional finance or to discuss existing finance facilities, what should I do?

Lenders retain the capacity and commitment to support viable businesses, so you should feel confident in approaching your finance provider, or others, if you wish to discuss finance requirements. It’s best to do this as early as possible.

If your primary lender cannot provide the finance you have requested, remember there are many alternative options at this stage and another finance provider may be able to support your business.

If a lender is not able to extend finance under its normal criteria, then it will look at a business’ eligibility under the Coronavirus Business Interruption Loan (CBIL) Scheme. If a business is eligible for the scheme, then the lender will consider whether the scheme could be used to help as a second option. In line with the government scheme, where lenders can provide finance to a business under their normal criteria and pricing, this is still the route to access finance.  More information is available here.

What happens if it takes my business longer to get paid by customers or my cashflow is disrupted?

Businesses concerned about cash flow issues should speak to their financing provider(s) as soon as possible to discuss what products and support may be available. These options may vary depending on your circumstances, it could be a applying for or extending an overdraft, a working capital loan or other sources of finance such as invoice finance.

It might also be sensible to consider payment practice more broadly, for instance whether your payment terms are still appropriate and whether they are clear enough. If you believe that your customers are not treating you fairly,  you could consider tools such as the Small Business Commissioner to take action against poor payment practices.

Invoice finance allows businesses to use the debts owed to them by their client businesses (as represented by their invoices) to release funding immediately instead of waiting for payment. Invoice finance can usually unlock around 85 per cent of the value of an invoice straight away, with the balance (less the financier's fees) paid when the invoice is settled. In addition to invoice finance, asset based lending can release funding against wider assets, including stock, inventory, work in progress, plant and machinery.

Many invoice finance providers will also provide sales ledger management services and can support clients in making sure that they get paid. In addition, bad debt protection can be provided as well as funding, or invoice finance can complement a client’s existing trade credit insurance facility, unlocking working capital as well as helping clients manage their payment risks and do more business.

As well as your main bank, there are a range of finance providers and types of finance, with the available options becoming significantly more diverse in recent years. Decisions on finance applications can often be quicker than you might expect, particularly if you have taken independent advice from an accountant or an independent business advisor, so you should hear promptly whether your application has been successful.

Figures show that banks approve around eight out of ten applications for SME finance. If you think you may need to consider alternative sources of finance, visit the Business Finance Guide to discover different funding options.

To increase the chances of a successful application, it’s vital that your business plans and projections are comprehensive and realistic. They should demonstrate that you know your market and understand your costs. If your business has a troubled history – such as adverse data (bankruptcies, CCJs) – then you must be transparent about what went wrong and demonstrate that you have put in place measures to ensure you now have a clean record.

Banks base their decision for a credit application on the information supplied by the business. The most common reason a loan application is not approved is because the bank is concerned a business might not generate enough money to be able to afford the loan repayments.

There is a range of coronavirus information and advice online.

Information about the UK government’s response coronavirus is available here.

Guidance for businesses from the Department for Business, Energy & Industrial Strategy (BEIS) and Public Health England is available here.

The Better Business Finance website has a finance finder tool.  

The British Business Bank’s Finance Hub provides information about finance options for businesses, as does the ICAEW and BBB’s Business Finance Guide.

The Chartered Institute of Credit Management (CICM) and BEIS have a series of guides to help businesses manage their cashflow. These guides cover a range of issues from knowing your customer and payment terms to treating suppliers fairly.

The Small Business Commissioner also provides a range of information helpful to businesses and now oversees the Prompt Payment Code and is able to take action against poor payment practices.  Further information about the SBC and what it can do is available here.

The Federation of Small Business has advice for small business available here.

NACFB

The National Association of Commercial Finance Brokers (NACFB) have 2,000 commercial finance specialists ready and able to help ensure funding is being deployed in the right way to the right people at the right time.

To help businesses access the NACFB’s  network of specialists, the findsmefinance platform has been designed to connect potential borrowers with its Members. This free online broker directory enables you to simply filter your funding requirements by loan size, type and location. You will then be presented with a range of relevant experts from the Association’s 2,000 commercial finance specialists to contact.

Begin your search for urgent business finance today at www.findsmefinance.co.uk

COVID-19

As the situation with Covid-19 in the UK evolves rapidly many consumers and businesses have questions about how the banking and finance industry will be able to support them to access the finances, support and guidance they need.

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