Where can my business find more funding during lockdown?

Updated on December 03, 2020

4 minutes to read

In the wake of the coronavirus, many forms of financing and business assistance have emerged, both nationally and locally. If your small business is still looking for the right kind of support, there might be other options you haven’t considered yet. Article by Nick Green.

Financing for SMEs affected by the coronavirus

Businesses have flocked to take advantage of government funding programs during the COVID-19 crisis, but many are still struggling to find the support they need. However, companies that have encountered obstacles may still find some form of support. Some small business owners may still ignore all that is available, and new initiatives continue to be launched by organizations such as Local Business Partnerships (LEP), business groups and the private sector.

The Coronavirus Job Retention Scheme (better known as the leave program), under which the government pays 80% of the wages of employees unable to work, is now closed to new applicants. Currently, around 9 million workers are on leave, but the plan is due to end on October 31, 2020, unless extended.

There are still plenty of other options for businesses that still need emergency financing during the foreclosure.

How effective are government loan programs?

So far, a total of almost £ 35 billion has been provided to companies in the form of government guaranteed loans. These take three forms: the Coronavirus Business Interruption Loan Program (CBILS), a similar scheme for large companies (CLBILS) and the Bounce loans scheme. It is the last of these that has proven to be the most popular and accessible, with nearly £ 24bn in funding coming from these ‘bounce back’ loans. Bounce loans can reach £ 50,000 or a quarter of the company’s turnover, whichever is greater. Money can be available in as little as 24 hours.

CBILS provided £ 9.6bn in funding, while CLBILS assisted 244 large companies to the tune of £ 1.6bn in total. However, up to 60 percent of large companies that have applied for this funding face either rejection or a long wait.

The approval rate for bounce loans is much higher, at around 80%. CBILS loans have proven to be much more difficult to obtain, with almost 49% of all applications unsuccessful. That said, CBILS loans potentially offer a lot more money – up to £ 5million – so checks on the viability of a business are much tighter.

Which is better – CBILS or a Bounce Back loan?

Some small businesses that took out a small CBILS loan early in the crisis might be better off switching to a rebound loan. CBILS loans can charge interest of up to 6 percent, while bounce loans have a fixed interest rate of 2.5 percent. Note that neither plan charges interest or requires repayment for the first 12 months.

According to accounting firm HW Fisher, a number of small businesses have found themselves with expensive CBILS loans when they may have cheaper bounce loans. Bounce loans can be used to pay off CBILS loans (there is no prepayment charge), so the switch should be easy to make. Accountants noted that the cost differential was “a little-known fact that banks seem unwilling to talk about.”

Support for SMEs in Local Business Partnerships

Various additional business support programs are launched by Local Business Partnerships (LEP). LEPs are partnerships between local authorities and businesses that aim to stimulate economic growth in local areas and, as such, are likely to play a central role in post-containment recovery.

Individual LEPs set up their own projects to support local businesses, based on their knowledge of the needs of the region. One of the first of these initiatives was launched by the Greater Birmingham and Solihull LEP (GBSLEP), and will aim to offer support in key areas such as helping businesses to adapt, bringing their services and taking steps to allow the physical reopening in a timely manner. Classes. A subsidy program is also planned.

Other LEPs taking strong action include the Solent LEP, which has allocated funds for “Restart, Restore and Recover” loans. These RRR loans are specifically aimed at helping businesses that have been unable to access other forms of support, as well as businesses deemed to provide an “economic lifeline and essential services” to the local economy. Loans of up to £ 1.5million will potentially be available where no other government assistance is available.

There are also encouraging rumors coming from LEP South East and LEP Power Plant North, and more are expected to follow. Companies that still need emergency bridging funding or other support should therefore contact their LEP to see what might be available now or in the near future.

The Future Fund and EIS

In the meantime, calls have been made for the government to provide new incentives to investors, so that companies trying to recover have more access to private finance. Buckworths law firm, which only works with fast-growing companies, joined 87 other signatories in a letter to Chancellor Rishi Sunak. They point out that investors using the Future Fund scheme cannot pretend EIA tax relief on their investment. This, they argue, risks excluding SMEs and start-ups from the Future Fund program.

This can be a particular problem for startups, many of whom have yet to demonstrate revenue and therefore may not be eligible for government guaranteed loan programs such as CBILS or the rebound program. Therefore, the letter calls for “a temporary tax break scheme for angel investors”, warning that the UK could otherwise lose “a generation of SMEs”.

The proposed solution is a temporary tax relief scheme for venture capitalists and angel investors, separate from the EIS but operating in a similar fashion. The government has yet to comment on the request.

Other initiatives to help businesses

Support for small businesses during the crisis can also come from the private sector. For example, Sky Media has so far pledged a total of £ 2.5million to 250 small and medium-sized businesses to help fund advertising. Sky’s SME Support Program will provide up to £ 10,000 per company, provided the company is UK-based, is at least one year old and employs less than 50 people. The free advertising will be available through Sky’s Adsmart platform, which personalizes the advertisements for the viewer based on consumer data.

Fittingly, some of the first beneficiaries of the program have been on the front lines of the COVID-19 crisis, including the Scottish Charity Air Ambulance and Bucks-based care provider Care & Carers. Hopefully other large companies able to help small businesses will follow Sky’s lead.

Ask your accountant about accessing government and private sector support for small businesses.

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About the Author

Nick Green

Nick Green is a financial reporter who writes for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business related topics for over 15 years and has previously written for major accounting firms PKF and BDO.

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