By Nicky Goringe Larkin, Managing Director of Goringe Accountants
On paper the Coronavirus Business Interruption Loan (CBILS) is an extremely attractive form of credit, backed by the government in the form of an 80% guarantee. Unfortunately, the likelihood of gaining access to one of these loans is notoriously low, with reports of less than 1% of enquiries for CBILS resulting in a successful application. Even though banks have been named and shamed by the government and personal guarantees are no longer being asked for loans under £250k, a successful loan application is still a rarity. This is partly because of the stricter criteria that banks are applying and partly because the loan application process time has increased, the volume of applications and the number of bank employees that are currently ill or self-isolating.
According to the IoD seven out of ten businesses owners said coronavirus poses a threat on their future. So, if SMEs are to survive Covid-19 they must consider other ways to preserve cash flow, as cash not profit/revenue is what is going to ensure survival.
There are seven alternative steps businesses can take to help their finances when struggling to secure the government based coronavirus loans:
- Access the grants available
Small Business Grants are being distributed by local councils, with many having contacted eligible businesses. If your business premises aren’t registered for business rates, your business will not qualify such as businesses based in serviced offices or from home. The criteria is strict so check on HM Government’s Business Support website. The grants should be paid out in April, therefore businesses will not have long to wait. Many of these companies may also be entitled to a business rates holiday if in the leisure/hospital/retail sectors.
The Self-Employment Income Support Scheme is for sole traders (or partnerships) that had less than £50k taxable profit in 2019, or under £50k average between the three tax years 2017-19. HMRC will contact tax payers directly if they fulfil the criteria and the support is supposed to be paid out in June.
The Coronavirus Job Retention Scheme (furloughing) has had significant press, the portal for applying for this scheme is not expected to open until end of April. Although early indications were that the pay outs would be received in April, due to the amount of businesses applying and the fact the system is not live yet, expect to fund your April payrun for your cash flow, and to receive the refund in May.
If you’re entitled to any of the above ensure to process your claim as early as possible.
- Client funding
- Contact your debtors
- Check with factoring companies
- Don’t give credit
- Negotiate large payments.
- Make the most of the tax deferrals starting with VAT
In summary, look at all options possible for preserving cash and finding new ways to raise money. The innovative and adaptable businesses will be the ones that survive this crisis.