Help! My Business is in Tier 3

Following the second national lockdown which came to an end on December 2nd 2020, the country was placed into a tiered system based on local risk levels. The most severe, tier 3, means many hotels and indoor leisure venues will have to close their doors, while hospitality businesses such as restaurants and pubs can only provide a takeaway service.

While some will be able to generate some much-needed revenue by operating in this way, it will be at a level which cannot compare to a busy weekend this time last year. Many others will make the decision that operating in this way is simply not worth opening at all.

Unfortunately for many of those who have found themselves in tier 3, this is not a new challenge being faced. Those in the worst affected areas of the country have been operating under severe restrictions for many months, with some never really having had the chance to reopen fully since the first lockdown was announced. This has decimated cash flow with money needing to be used to cover overheads without any income coming into the business.

Government help for businesses in tier 3

If your business has found itself under tier 3 restrictions, you may be concerned about what the future holds and whether you can continue operating. Here are some things which may help:

• Local Restrictions Support Grant (LRSG) – Grants are being made available to business who were open and operating as usual yet were forced to close as a result of being placed under tier 3 restrictions. A non-repayable grant will be given to those businesses forced to cease trading due to local restrictions. To claim, eligible businesses will need to apply directly to their local authority
• Coronavirus Job Retention Scheme (CJRS) – The CJRS was hugely successful in saving thousands of jobs during the first national lockdown, and it has now been extended until 31 March 2021. This allows employers to furlough staff for whom there is not enough work to go around rather than making them redundant. The government will pay 80% of wages up to a monthly maximum of £2,500, however employers do have to cover National Insurance Contributions (NICS) and pension contributions.
• Bounce Back Loans – Bounce Back Loans are aimed at small and medium sized businesses who require a financial boost. Eligible businesses can borrow up to 25% of their turnover, up to a maximum of £50,000. These loans are 100% secured by the government meaning companies do not have to provide a personal guarantee. The loans come with some extremely favourable terms including a 12-month interest free period, followed by a rate of just 2.5% thereafter.

While these schemes could provide the lifeline some businesses need to get through these challenging times, for others, they will not go far enough. Depending on the scale of your problems, and whether you believe your business is viable in the long-term, you may need to consider a formal rescue or restructuring strategy.

Business rescue advice for tier 3 companies

When it comes to business rescue, there are a variety of options which can be considered. By taking advice from a licensed insolvency practitioner, you will be able to understand what each of these options entails and which one is likely to be the most appropriate solution for your company.

If you believe your company has a future yet it is struggling to pay creditors with a reduced income, a Company Voluntary Arrangement (CVA) may be able to help. A CVA involves formal negotiations between a company and its creditors in order to reduce monthly outgoings while still allowing the business to continue to trade.

Alternatively, those companies facing mounting pressure from disgruntled creditors could opt for administration in order to give the company the time and breathing space it needs to work out a way forward.

Liquidating your distressed company

If the problems caused by the continuing coronavirus crisis has taken your business beyond the point of rescue, you may be left with little other option than to wind it down and place it into liquidation. This can be achieved by way of a Creditors’ Voluntary Liquidation (CVL) in which an insolvency practitioner is appointed to manage the orderly shutdown of an insolvent company. They will be responsible for identifying company assets, dealing with all outstanding creditors, before ensuring the company is removed from the records held at Companies House. At that point the company will cease to exist as a legal entity and all outstanding liabilities will be written off, unless they have been personally guaranteed.

When your company is experiencing financial distress, the best thing you can do is to take swift advice at the earliest possible opportunity. The sooner you seek help, the more options will be available to you and your business. Speak to the experts at Real Business Rescue today on 0800 644 6080 and take the first steps today.