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Let's beat the virus - by working together

A further update on various matters Coronavirus-related

We are all getting emails about ‘this and that’ so we are aiming to provide sensible advice, as well as background information.

What are the 4 key action points in this update?
  • Prepare your business plan and projections now to support any finance requests you may need to make (we can help with this)
  • Speak to the HMRC Time to pay helpline to defer payments of VAT and PAYE etc.
  • Consider cancelling any Direct Debits for rates if you believe you are entitled to the ‘Rates Holiday’ announced on Tuesday
  • ‘Buy Local and Pay Local!'

The Government's measures to support businesses

As of 18 March 2020 include:

  • A statutory sick pay relief package for SMEs (but the legislation is yet to be passed, so the new rules may not yet be in force).
  • A 12-month business rates holiday for all retail, hospitality and leisure businesses in England:  Please think about cancelling any direct debit set up to pay the rates. One of our clients spoke to the local council about the rates holiday and was advised that the DD payment should be made and then the council would repay it in due course! As cashflow is going to be an issue for businesses, this is the economics of the madhouse! Please speak to your council before stopping the DD to advise them that you will be considering this.
  • Small business grant funding of £10,000 for all businesses in receipt of Small Business Rates Relief (SBRR) and Rural Rates Relief. There is no need to apply for this as it will be allocated to all eligible businesses. The latest news is that the councils are awaiting clarification on the timing of this and will be updating their website with further information in due course.
  • Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000. The latest news is that the councils are awaiting clarification on the timing of this and will be updating their website with further information in due course.
  • The Coronavirus Business Interruption Loan Scheme (“CBILS”) to support long-term viable businesses who may need to respond to cashflow pressures by seeking additional finance (see below)
  • HMRC time to Pay scheme

CBILS

While no specific details are available about the ‘terms and conditions’ of the scheme, there is some information on the British Business Bank website:
Coronavirus Business Interruption Loan Scheme - CBILS

The key points there are that: 

  • It appears that before you can be allowed into CBILS you first need to approach your bank with a request for finance on their normal terms
  • Only if the bank turns you down for their normal lending facilities will the banks consider offering support through CBILS
  • CBILS is expected to be available in the week commencing 23 March

So, if you are looking for CBILS to provide you with finance assistance, you must prepare a business plan (probably including profit and loss and cash flow projections) as a matter of urgency and also make an appointment with your bank manager to get the process underway. If you need assistance with preparing projections please let us know, as we can help you prepare the necessary projections. We expect demand to be high, so getting a meeting set up early is vital (especially if bank managers are working from home and not available for face to face meetings).

It is not clear whether CBILS will be a better ‘offer’ (especially as CBILS will offer interest free for 6 months) than the banks’ standard loans. If it is going to be a better deal, will banks automatically decline your initial proposal so that you can get the benefits of CBILS?  It would, therefore, be sensible to find out the terms of CBILS so you can work out which is the better deal.

We recall that a spouse, unwilling to let their house be put up for security, was a reason why the banks ‘refused’ finance on their standard terms and that this was often used as a way of getting businesses onto what was then the Enterprise Finance Guarantee Scheme.

You may have read that the CBILS loan is 80% guaranteed by the Government. The above website is clear that the guarantee is to the bank (not the borrower) and that the borrower is always 100% liable for the repayment of any CBILS finance provided by the bank.

HMRC time to pay

If you have any concerns about your future cashflow, talk to the Time to Pay helpline before the next payment is due to HMRC.

Although it is early days to see what can be achieved here are two examples:

  • One of our clients has a £30,000 VAT bill: agreed three monthly payments of £10,000 with absolutely no questions asked.
  • One of our contacts has advised us that their client had a £7,600 VAT liability which was agreed could be paid weekly over 12 months with no interest and penalties.

Based on this limited information, it might be better to ask for more time to pay than you think HMRC will agree to. You may be pleasantly surprised as to what terms can be agreed!

Staffing

For a lot of businesses, wages are one of the biggest cashflow items (even if the PAYE liability is being deferred under a time to pay arrangement).

The Government has promised more support for employers, but exactly what the support will be is not yet known. Watch this space.

Before making staff redundant, please consider other options (such as short time working, asking staff to take holiday if no work is available etc.) that may reduce the cash outflow from your business while retaining your team for when normal service resumes (which it will).

There is some guidance on this here:

Layoffs and short time working

Please make sure you do not inadvertently make a long serving employee redundant, as they may be entitled to a significant amount of Redundancy pay. A brief explanation of how this could happen is included in the Government advice; but if in doubt, speak to your HR consultants.

If you do not have a retained HR consultant, as a client of Rowdens you can access the Croner Taxwise Business Support Helpline which offers telephone Employment advice and support.  

The number to call is 0844 561 8155 (a slightly premium rate number)
Advise them you are a client of Rowdens and that the scheme number is 80969.

Paying local suppliers

Please remember that we are all in this together, and it is important that we support our small local businesses to ensure that they are still around for us once the Coronavirus is history. 

So, the phrase ‘Buy Local’ should now be ‘Buy Local and Pay Local!

Please make an effort to pay your local suppliers (perhaps in preference to large suppliers) as they are going to have wages and other local suppliers to pay and they, just like you, would hate to make staff redundant or close their business due to a cashflow problem.

I am sure an economist can talk at length about the velocity of money but, effectively, if I pay you and you pay Fred and then he pays June and June pays me, everyone’s cashflow is unchanged, but each business has collected some cash and reduced their liabilities;  a ‘Win, Win’ all round!

Any other suggestions:

We know businesses are looking at new ways to generate income in these troubling times. If you are happy to share your ideas with us (and other local businesses) please let us know your ‘cunning plans’ by emailing advice@rowdens-ltd.co.uk

For example:

  • Pubs and restaurants can now offer a take away service; Permission for pubs and restaurants to operate as takeaways
  • A second hand furniture firm is offering to deliver now, hire and collect later, second hand office desks, to make temporarily working from home more effective than using the kitchen table

Any other ideas will be gratefully received and it may spark an idea for someone else! 

Need more advice?

Please contact us if we can help in any way and follow us on our Rowdens Facebook page and request to join our Rowdens Facebook Group. We're on LinkedIn too!.