[UPDATED ON WED 18TH MARCH 2020 FOLLOWING THE CHANCELLOR’S ANNOUNCEMENT ON 17TH MARCH 2020]
No matter how strong your balance sheet is and no matter which sector you operate in all of our businesses will be tested over the coming weeks and months.
With that in mind I’ve summarised the various funding measures that are available to small businesses following the Chancellor’s announcements so you can quickly see what help you might be able to get ASAP. I’ve also included a few thoughts on each option and some advice on how to prepare for this period of uncertainty.
- Summary of Grant/Funding Options
- Small Business Grant
- Coronavirus Business Interruption Loan Service (CBILS)
- High Street Banks
- Contingency Budget
- Beware of Scams
Summary of Grant/Funding Options
The table below summarises the funding options that are (or will become) available to help small businesses (including healthcare practices) through the coming weeks and months.
|Funding Type||Name||Provider||Summary Criteria||Amount||Can I get it now?|
|Grant||Small Business Grant||Your Local Council||If you receive small business rate relief you should be eligible||£10k |
|Grant||–||Your Local Council||You operate in retail, hospitality and leisure sectors;|
Rateable value < £51k
|up to £25k per business||No|
|Business Rates Relief||–||Your Local Council||You operate in retail, hospitality and leisure sectors;|
Rateable value < £51k
|No business rates for the next 12 mths||I’d expect this to be reflected in revised bills|
|Loan||Business Interruption Loan Service||British Business Bank||Revenue < £41m;|
Operate in an eligible sector – healthcare is eligible;
Not previously received stat aid beyond €200k
|up to £5m with no interest due in first 6 mths||From 23/03/20|
|Loan||SME Support||Lloyds Banking Group||Revenue < £25m;||Unspecified||Yes|
|Loan||Working Capital Support||NatWest||Unspecified||Unspecified||Yes|
Small Business Grant
At the time of writing no new information is available about how to apply for the Small Business Grant, first announced in the Chancellor’s speech on 12th March 2020. I’ve checked a number of local authority/council websites and none appear to have any information about it at present. However, in light of the significantly increased package of measures in the 17th March announcement its seems clear that the government recognises that these funds are required urgently.
Your eligibility for the Small Business Grant depends on whether or not your property/office/clinic is subject to Small Business Rate Relief. The easiest way to find this out is to check your last Non Domestic Rates Bill, example below:
You should see a line like the one above applying a 100% discount to your rates bill.
If you can’t easily track down your last rates bill go to the Business Rates Valuation site, enter your postcode and look for your office.
At the time of writing there are no details on how to apply for the Small Business Grant but from previous experience local authority grants tend to be relatively straightforward to apply for. However, given the likely pressure on the system I’d make sure you’re eligible in advance, check your local authority’s website daily and get your application in without delay.
Even if your business is in extremely good shape my advice would be to apply for the grant and hold on to it as a safety net. None of us have any idea how long this might go on for and should your circumstances become more pressing the last thing you will want to do is go through an application process and wait for the funds to arrive.
To try and make life easier for everyone I’m checking my local council’s website (Cheshire West) daily and posting any changes here. You may get updates from your own council quicker but they’re all going to be working to the same rules so hopefully this will help if you’re elsewhere in the UK and not getting the information that you need.
Coronavirus Business Interruption Loan Service (CBILS)
This facility, which is primarily underwritten by the British Business Bank, is aimed at supporting lenders (including most high street banks: Lloyds, TSB, Natwest, Barclays and many more) to offer credit or debt facilities to businesses where they might ordinarily decline it.
Often when commercial banks lend to small businesses they tend to cherry-pick the best bets to minimise their risk. However, this measure by the Chancellor is aimed at encouraging lenders to back more risky financing propositions that may, through no fault of their own, have got into difficult as a direct result of coronavirus.
For most healthcare practices, the primary financing options that are likely to be relevant via this scheme will be:
- Term Debt – generally a cash-flow loan with an agreed interest rate and repayment schedule, often 3-5 years. Based on the assumption that this outbreak is temporary a loan of this nature could provide a way of smoothing out a short-term (3-4 month) dip in income
- Overdraft – standard overdraft facilities with more preferential terms than those currently on offer
For those practices that invoice businesses (as opposed to individuals) and are finding that payment is being delayed as a result of coronavirus you might also be able to secure invoice financing. In essence, this means that your invoice gets paid immediately by the lender but they take a percentage of the invoice value. The percentage they take depends on the risk profile of the organisation paying the invoice. If its a public sector entity (like the NHS) the risk is likely to be low and so this can be a good way to “pull forward” income at a relatively low cost if you feel future cash-flow might be tight.
CBILS will also offer asset finance but I can’t envisage too many circumstances where this will appropriate for a healthcare practice but if you find yourself in a situation where you are declined credit (most likely a lease) for a large asset purchase you might want to consider talking to one of BBB’s partners as well as your business banking provider.
IMPORTANT: If you plan on applying for finance via CBILS you will need to ensure you have your ducks in a row. The government is priming the system by underwriting a large proportion of this extended credit but ultimately the provider will be a regular bank, leasing company or financing specialist and normal business rules apply. You’ll need a clear strategy, a coherent and credible financial plan (Historic Profit & Loss Accounts, up to date Balance Sheet, Cashflow forecast and a probably a 3 Year Budget).
High Street Banks
There may be some exceptions but as far as I can see the vast majority of high street banks are partnered with BBB and so I’d expect all of them to be offering emergency facilities underwritten by CBILS.
Some, like Lloyds Banking Group and NatWest, have come out and made statements about supporting small businesses but this to me (call me a cynic) feels like marketing hype as all banks are being actively encouraged to support small businesses using CBILS.
That said, it’s worth shopping around as the terms offered by the various banks will vary depending on their risk profile. Oddly, some may see this as an opportunity to win your business if they view coronavirus as a temporary economic shock. Whilst others may be significantly more risk averse (and expensive) if they take a more pessimistic view and expect this to be the pre-cursor to a global recession.
Under normal circumstances its prudent to set aside funds for VAT and Corporation Tax but if you haven’t had the luxury of being able to do this and you now find yourself unable to pay your VAT or Corporation Tax bill you need to take action ASAP.
If you have the opportunity try to get a basic handle on your finances before you contact HMRC. They will be interested in if/when/what you can pay so the easiest thing you can do is a very simple 30-day daily cash-flow analysis with four columns – Date, Income, Outgoings & Net Balance (here’s an example that you can copy in Google Sheets). By doing this and perhaps even running it out over 90 days you should be able to have an informed discussion with HMRC about the specific periods when you might have the most acute cash-flow pressure and also when you might be able to pay any tax that is due.
If (for whatever reason) you’re unable to do some preparation before contacting HMRC please don’t delay. Contact them immediately, explain your circumstances and my take-out from the Chancellor’s speech is that HMRC will endeavour to exercise more leniency than they would do under normal circumstances.
If you don’t have a budget you might want to consider producing a contingency budget for at least the next 12 months. The article below should help with this:
Disclaimer: The article above talks about budgeting for a healthcare practice but if this article has been shared with you and you don’t run a healthcare practice its equally applicable to your business. It also includes a budgeting template that you can download and use if you need to create a budget in a hurry.
Under “normal circumstances” a contingency budget is necessary where something is fundamentally wrong with the economics of your business and requires remedial action. What we’re facing today is NOT NORMAL and will not be permanent. With that in mind my sense is that we all need to attempt to put our businesses into tick-over mode (using the grants/funds that are available or cash reserves if you have them) rather than slash and burn.
So, in the context of this specific situation my advice would be as follows:
- Take a very pessimistic view on sales through the next 3-4 months with a steady increase thereafter.
- Remove all non essential costs – we all have these to a lesser/greater extent
- Maintain non headcount costs that are critical to the day to day operation of your business so that you can resume “normal service” when this is over
- Maintain headcount – our businesses are nothing without the fabulous people that work in them and in times like these we need to stick together even if that requires compromises across the board (reduced hours, reduced pay etc.). Once we’ve come through this (and we will) we’ll need everyone to pull together to re-build our businesses and re-energise the economy. Now is not the time to give up on your team!
Beware of Scams
If you require finance as a result of more challenging trading please be careful about the websites that you visit and the emails that you engage with. Sickeningly, there are already lots of phishing and spoofing scams out there preying on businesses that require short-term financing as a result of the coronavirus epidemic.
I hope this is useful.