With the furlough scheme closing and deadlines coming up for applications for government backed loans the Chancellor’s statement about the next round of support for businesses struggling with the impact of Coronavirus was hotly anticipated. But what’s in it for small businesses? Here’s my view on the coronavirus support that was announced on 24th September:
If you deferred a VAT payments that was due between April and June 2020 it had been expected that this would need to be paid over by the end of March 2021 at the latest. Now however the Chancellor has extended this deadline so that repayment can be spread over the 2021/22 fiscal year in up to 11 monthly instalments.
Business Interruption Loans
The deadlines for applications to both the Coronavirus Business Interruption Loan scheme (CBILS) and the Bounce Back Loan scheme have been extended to 30th November 2020 and repayments for both loans have been made more flexible.
CBILS loans (>£50,000) can potentially be extended for up to 10 years (an increase on the previous 6 year term) with the lenders agreement. This will almost half the monthly repayments.
Bounce Back Loans (<£50,000) can also be extended to 10 years. Furthermore the Chancellor announced that after 6 repayments have been made there will be potential for businesses to take a payment holiday or make interest only repayments for 6 months in order to ease pressure on their cashflow.
The interest rate on these loans has been fixed, after the first 12 months of interest is picked up by the government.
The Bounce Back Loan application is automated and easy to complete, the CBILS loan application process is more arduous; find advice on what is required here.
Job Support Scheme
The Job Retention Scheme or “furlough” comes to an end on 31st October. It is to be replaced by the Job Support Scheme, which will offer support for businesses to retain staff part time over the following 6 months.
The outline is that so long as the employee works at least 33% of their contracted hours the government will pay one third of any shortfall in the wages, while the employer must pay another third. The government’s contribution is capped at £697.92, although Employers’ National Insurance and Pension contributions will have to be added to the final bill.
This is no where near as generous as the original 80% salary replacement from April, but it will help businesses who are finding it difficult to utilise staff (particularly salaried staff) for all of their contracted hours.
The Chancellor was very clear that this is to support viable jobs which means that it will be most helpful when there is a really good reason for not letting that member of staff go, and when the staff concerned are working most of their contracted hours.
The best tool for surviving any sort of business uncertainty is a cashflow forecast, and that’s certainly true of the continuing Covid-19 disruption. You can download my specific Coronavirus Cashflow Checklist here, and you may like to check out this blog about the reasons why a cashflow forecast is particularly important now