Coronavirus –

Financial guidance for businesses during COVID-19

Published

4th February 2021

Category

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As the pandemic evolves, many businesses are still facing an economic downturn and pressure on cash flows. Government support continues to give essential support to those businesses that need help weathering the current economic storm. 

We have seamlessly supported our clients throughout the pandemic and continue to do so on a daily basis.  The information provided below is a summary of some of the actions businesses can take at this time. We strongly recommend that you liaise with your professional advisers to understand what these schemes and rules means for you and your business.

Recovery Loan Scheme (RLS)

The Recovery Loan Scheme (RLS) launched on 6 April 2021 and supports access to finance for UK businesses as they recover and grow following the Covid-19 pandemic. 

RLS aims to help businesses affected by Covid-19 and can be used for business purposes, including, managing cashflow, investment and growth. It is designed to support businesses that can afford to take out additional finance for these purposes. Businesses who have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme. 

A key aim of the Recovery Loan Scheme is to improve the terms on offer to businesses, but if a lender can offer a business the choice of a commercial loan on better terms, without requiring the guarantee provided by the RLS, they should do so.

At Autumn Budget 2021, the government announced that the Recovery Loan Scheme will be extended by six months to 30 June 2022, with changes applying to all offers made from the 1 January 2022. 

Please visit our RLS page for more information on this scheme.

Bounce Back Loan Scheme (BBLS)

Please note that the Bounce Back Loan Scheme (BBLS) was closed to new applications on 31 March 2021. Please visit our BBLS page for more information on this scheme.

The Bounce Back Loan Scheme (BBLS) was launched to enable businesses impacted by the current coronavirus pandemic to access financing quickly. This government-backed scheme is run by the British Business Bank (BBB). Following the launch of the scheme, Arbuthnot Latham has become an accredited lender, but only for existing clients. BBLS offers affected businesses the opportunity to borrow between £2,000 and £50,000 or up to 25% of the 2019 turnover (Loan capped at £50,000) for a term of six years, inclusive of a 12 month capital repayment holiday.

In these extraordinary times, the old adage of “cash is king” has never been more pertinent. All businesses need an accurate rolling 13-week cash flow forecast, which should be kept up to date and allow you to understand your liquidity position and potential options available to manage your cash position.

  • Review your fixed and variable costs to understand what savings you can make. Make sure you are prioritising the necessary expenses and deferring any luxuries.
  • Credit control remains fundamental and you should be in touch with your clients to get firm payment dates for your invoices so that you know when your cash should actually be coming in. Some blue chip clients offer early payment plans, inevitably at a fee, which given the importance of cash should be looked at.
  • Make sure that you are invoicing as frequently as possible, and maintain regular contact so you know when to expect payment and are aware of any potential delays.
  • Proactively speak to your key suppliers to negotiate extended credit terms – key suppliers may be willing to grant you longer terms to pay their invoices. All suppliers would rather you agree a payment date with them, rather than simply defaulting.

Relaxing of Insolvency rules

With concerns that the disruption caused by the pandemic will cause many businesses to fail, the government introduced the Corporate and Governance Act 2020 to update the UK insolvency regime help businesses with temporary measures.

With the act, the government suspended the insolvency rules for wrongful trading, backdated to 1 March 2020.

Under the existing wrongful trading legislation:

  • As a director, you should not allow your company to continue to trade whilst you are knowingly insolvent.
  • If you do trade whilst insolvent, a director has the potential to become personally liable for the company’s debts.

Further Support

In addition to the various Government measures outlined above to support businesses during this time there are also a number of free resources available to companies. One of these is All Together which was formed by a group of business leaders and entrepreneurs to provide free and confidential advice and support to founders, CEOs and business owners of UK and Ireland SMEs for businesses affected by Covid-19.  Their focus is primarily in the technology, consumer, retail and hospitality sectors. Further information can be found on their website.