Since March of last year, the resilience of businesses across the UK has been put to the test. From the spread of the coronavirus and the subsequent national restrictions, to the impact of a finalised Brexit deal, it's been a struggle for some business owners to retain staff while keeping their office lights on. Due to the unpredictable nature of these circumstances, most small to medium-size enterprises (SMEs) didn't have pockets deep enough to cover these up-front costs themselves.
Fortunately, though, in an effort to support UK businesses through the uncertainty of Covid-19, a series of government-led initiatives helped to alleviate some of this financial burden. Most notable among these measures was the Coronavirus Business Interruption Loan Scheme (CBILS). This state-backed loan scheme dramatically changed the funding landscape since its commencement in March, and has since provided support to a whopping 84% of UK businesses.
However, despite a series of deadline extensions, as it currently stands, this support mechanism is due to come to an end on the 31st of March. So, as business owners across the nation look towards the future, many are left wondering what other assistance is available. Luckily though, there is help out there. In this article, we're going to address the many public and private options that are available to SMEs who are looking for financial support to tide them through the covid storm.
But first of all, what exactly is CBILS, and why is it coming to an end?
The Coronavirus Business Interruption Loan scheme, or CBILS, provides SMEs who are dealing with disruptions to their cash flow (due to Covid-19) with up to £5 million in government-backed support. Operated by the British Business Bank, the loan scheme works through over 100 accredited lenders that range from high-street banks and local lenders, to online fintech platforms. CBILS provides a variety of funding options, such as term loans, invoice finance, asset finance, and overdrafts. The scheme is also state-backed, which means that the government guarantees 80% of the finance, allowing businesses to avoid fees and interest payments throughout the first year of borrowing.
Before it's implementation on the 23 March, businesses were only able to access similar loan schemes through their banks. This was less than ideal, because the loans they provided were much less flexible and comprehensive than the government-backed schemes. Therefore, when CBILS and similar schemes like the Bounce Back Loan Scheme (BBLS) were rolled out, they provided a lifeline for millions of businesses who were severely impacted by the Covid-19 pandemic. To be specific, since their inception, CBILS and BBLS have provided small to medium-sized businesses across the country with over £25 billion in financial support.
Originally designed to be available until the 30 September 2020, the deadline for CBILS applications has been pushed back twice now to 31 March due to the ever-evolving nature of the pandemic. However, since no further extension has been announced, the CBILS scheme will likely be replaced by a similar model shortly, as part of the government's effort to adopt a more sustainable approach to small business financing. So, without further ado, let's look into the finer details of this new programme, and address what alternative funding options are still available to SMEs.
The replacement government-backed loan-scheme
For those currently relying on CBILS to support their business through the pandemic, their best option going forward is likely to be the programme's upcoming replacement. The successor, which was alluded to in Chancellor Rishi Sunak's Winter Economy Plan, is expected to begin in January. However, a date for its rollout and the plan's finer details are yet to be officially announced, as of the writing of this article.
With discussions still taking place by Treasury officials, the new state-backed loan scheme is expected to support lending from banks and other financial institutions in a similar way to its predecessor. The new programme could carry a guarantee of 80% of loans of up to £10 million for companies eligible for support. However, the amount of government-backing the loans will feature is yet to be officially decided upon, so this figure is subject to change.
As part of an effort to make government-backed loans more accessible to smaller businesses and limited companies, the lower end of the loans is set to start at just a few thousand pounds. This is in stark contrast to the £50,000 loan minimum that's a feature of the current CBILS programme. The repayment time frame is expected to be similar to its previous model, with businesses not being required to pay back finances for up to six years. Additionally, the types of financing this new scheme will provide is expected to correspond with the current CBILS model, with revolving facilities such as asset finance facilities and overdrafts still being made available to businesses in need.
The CBILS successor is likely to provide financial assistance to SMEs throughout most of 2021. However, since the specifics of the plan are yet to be announced by the government, businesses owners have little option but to sit tight until further announcements are made.
If you are looking for funding that you don't need to pay back in the form of short or longer-term cash injections, it may be worth taking a look at government business grants. As part of the government's push to support small businesses impacted by the Covid-19 pandemic, they released a series of grants to help prevent SMEs from going under. So, here's a rundown of the main grants that are available for small businesses, as well as the details on how to apply to them.
The Coronavirus Job Retention Scheme
More popularly known as the 'furlough scheme', this measure has been instrumental in helping businesses to retain their staff since they were initially required to close as a result of the first national lockdown. First introduced on the 19th of March, amidst a series of other measures designed to support small businesses, this scheme has provided businesses with more than £50 billion in funding throughout 2020 alone.
The scheme provides each enrolled worker with 80% of their salary (up to a maximum of £2,500 per month). Since staff are typically the number one expense of most businesses, this initiative has helped millions of SMEs to stay in business, while helping even more employees remain in stable employment. While it's likely that you've been making the most of this scheme since it was originally rolled out back in March of last year, for those who haven't yet claimed for support under the job retention scheme, you have until the 30th of April to apply for funding.
Am I eligible?
All employers in the UK are eligible for this scheme, as long as they are enrolled for PAYE online and use a UK, Isle of Man, or Channel Island-based bank account. However, you are only able to claim for furloughed employees that have been on the company's payroll from the 30th of October 2020. This means that, if a member of staff was employed after this date, it's unlikely the furlough scheme will be able to contribute to their wages.
For more information about the furlough scheme, and details on how to make a claim, visit the GOV.UK page on it here.
Local Restrictions Support Grant (for closed businesses)
Unfortunately, due to the new Covid-19 variant and the subsequent third national lockdown, most businesses operating within the UK have been asked to temporarily close. While these measures are slightly less stringent than those implemented throughout the first and second lockdown, all non-essential businesses are affected by these measures. But, for all SMEs that have been required to close due to temporary restrictions, the Local Restrictions Support Grant for closed businesses can offer a cash injection for each 14 day period they are closed.
The amount of support offered is based on the rateable value of the property. The minimum amount of relief provided is £667 bi-weekly for smaller businesses, and the maximum amount available is £1,500 bi-weekly for SMEs with a more considerable rateable value. For more information on the amount your business could be eligible to receive, visit the GOV.UK guidance here.
Am I eligible?
You will be eligible to receive this grant if your business was required to close due to national restrictions, and if the business has been closed from the 19th of December or after. Your business is also required to have been shut for at least two weeks, to be based in England, and to be unable to provide its usual in-person service.
If you think your business is eligible for this grant, you can apply for the funding through your local council. For help on how to find your local council, visit this link.
Local Restrictions Support Grant (for open businesses)
Despite the extensive nature of the current lockdown regulations, non-essential businesses are allowed to stay open if they operate using delivery, takeaway, and click-and-collect services. So, if your business is still permitted to remain open, but your revenue is severely impacted by the temporary restrictions, you may be able to apply for the coronavirus Local Restrictions Support Grant for open businesses.
Similarly to the Local Restrictions Support Grant for closed businesses, this grant provides funding to businesses every two months. The amount that is administered is also based on the rateable value of the property, with the lowest bi-weekly amount being £467 and the highest being £1,050. For more details on what your business could receive, visit the GOV.UK guidance on the grant here.
Am I eligible?
In terms of eligibility, if your business is based in England, was established before the introduction of Tier 2 and 3 restrictions, has not had to close, and has been adversely impacted by the national restrictions, you may be able to apply for the grant. However, if your business is in administration, insolvency, or has been struck off the Companies House register, it will be excluded from the fund.
To access the Local Restrictions Support Grant, you also have to apply via your local council's website.
Top-up grants for businesses in retail, hospitality and leisure
As a response to the national restrictions that were brought to effect on the 5th of January, Chancellor Rishi Sunak announced a discretionary fund to support small businesses. As part of this discretionary fund, £617 million has been made available to help small businesses with ongoing fixed-property costs, in the form of top-up grants. Similarly to the local restriction support grants, the amount of money each business is eligible for depends on the rateable value of their property. However, the support is provided on a one-off basis, instead of paying out every two weeks.
In terms of the capital that's available, there are three levels to these grant payments. Grants of £25,000, £10,000, and less than £10,000 will be offered out, depending on the unique requirements of each business that applies. The amount given will be up to the discretion of your local authorities.
Am I eligible?
These top-up grants are only available to businesses operating within the retail, hospitality, and leisure sector, so if your SME belongs to a different industry, it will not be eligible. To access the grant, businesses are also required to have under 50 employees, must have been forced to close due to the latest national lockdown restrictions, and must be able to demonstrate that they have been significantly affected by these measures.
More information about these top-up grants, as well as details on how to apply for them, visit the latest GOV.UK guidance on them here.
Additional Restrictions grants
Not eligible for any of the grants we've just covered? Don't panic. The Additional Restrictions Grants (ARG) provide councils with grant funding for businesses that aren't covered by any other government grants. This scheme helps to support closed businesses that don't pay business rates, as well as open businesses that are experiencing a lack of revenue due to the current restrictions.
Am I eligible?
It's up to the discretion of local councils to decide who is eligible for the grant, but this grant is expected to help businesses across a range of different industries that are impacted by Covid-19. However, you are excluded from receiving funding if your business is in administration, if it is insolvent, or if you have exceeded the designated limit on subsidies.
Since this grant is administered by regional councils, if you think you are eligible and would benefit from this support mechanism, you should discuss this with your local authority.
Self-Employment Income Support Scheme grant extension
If you are self-employed, or a member of a partnership, and if your ability to trade is being severely impacted by the coronavirus, help is available. The Self-Employment Income Support Scheme, which has already provided millions of workers across the country with financial assistance through a series of grants, was extended on the 5th of November. Due to the increased threat of the coronavirus and the associated restrictions, two additional grants were announced. So, from February 2021 to April 2021, the fourth part of the scheme will be open for applications.
The grant covers 80% of three months' average monthly trading profits, up to a cap of £7,500 per person. The financial support will be paid in one lump payment every three months while the scheme is still running, and the payment is taxable and subject to National Insurance contributions.
Am I eligible?
If you have been eligible for the previous editions of the Self-Employed Income Support Scheme, the likelihood is you will also be able to receive this grant extension. The scheme only administers support to self-employed individuals and members of partnerships, and you must be able to demonstrate they were previously trading before they were impacted by the coronavirus, or that you are currently experiencing reduced demand for your products or services due to the pandemic.
For more information about this scheme, and details of how to apply for the fourth grant, keep an eye on the latest developments on the GOV.UK website.
If you're not eligible for state funding, or if you've exhausted all public resources, other options are still available. Next, we'll be going over a couple of private and community-based funding alternatives that may be able to support your business through 2021.
Business cash advances
Otherwise referred to as a merchant cash advance (MCA), a business cash advance is a private form of funding that gives open businesses lump-payments in exchange for a percentage of their future revenues. It typically offers businesses with short-term and unsecured loans, and, for this reason, it's only accessible to SMEs with a reasonably positive credit score. Unlike more conventional unsecured loans, with business cash advances, payments aren't paid back to the lender each month. Instead, an agreed-upon percentage (normally around 10%) will be taken from every future sale that is processed on the businesses card machine and given back to the lender to contribute to the repayment process.
This type of financing is beneficial to businesses suffering from the impact of Covid-19 because it can provide SMEs with funding very quickly. Since business cash advances usually have high approval rates, the application process is often relatively frictionless, and finance can be available within days of applying. Business cash advances can also work in line with your company's cash flow, as they don't require you to pay back the loan in large lump sums. By taking much smaller increments of capital every time a purchase is made, it's a much more viable option for businesses who are suffering a lack of demand due to the national coronavirus restrictions.
Am I eligible?
Your business will be eligible for a cash advance if it's been turning a profit for over six months, if you process sales on card machines, and if you meet the sales threshold that has been designated by the lender. If you're interested in this type of loan, it's offered by a wide variety of online and brick-and-mortar vendors, but make sure to assess the company's credibility before making any sort of commitment.
Simply defined as a way to raise money from a large number of people, crowdfunding is a great way to gain capital to get a company off the ground, or to help it out of a tough spot. Depending on the unique needs of each business, there is a range of different crowdfunding options out there, including equity and debt crowdfunding. Here's a rundown of these two different types of funding:
Equity crowdfunding - This form of funding provides capital to SMEs in return for shares (or a small stake in the business). It's useful if your business is in need of an instant financial pick-me-up, and it works the best for companies who are growth-focused, and who are likely to expand in the near future.
Debt crowdfunding - Debt crowdfunding is when investors fund a project a business is doing in exchange for a financial interest on their investment. This type of funding is suitable for companies that expect a boost in revenue soon, as they will be required to pay back the support. However, debt crowdfunding can be a more attractive option than other business loans because lenders typically offer much more generous borrowing rates.
So, as we've addressed throughout this article, if your small business has been relying on the Coronavirus Business Interruption Loan Scheme for the past few months, there are a plethora of other funding options available once the service does come to an end.
However, for businesses that have not yet utilised the loan scheme, you still have until the 31st of March to complete your application If you're considering applying, MarketFinance can help you along every step of the way. Our in-house team of experts are on hand 24 hours a day to help you through your application process. Unlike other accredited lenders, we don't believe in lumping the customer with any unnecessary fees or taxes.
If this sounds like something you may be interested in, or if you want to see what other financial guidance we offer, just take a look at our site here.