Updated: 2nd March 2021
Coronavirus has caused widespread financial difficulty for businesses around the country, and the measures to mitigate the spread of the virus continue to affect trade and operational capability.
If your business has been affected by coronavirus, you may be able to access emergency finance through the government’s coronavirus loan schemes. The Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) remain available for applications until 31st March 2021.
Your business might have been affected by Covid-19 in a number of ways. The national lockdowns have forced non-essential shops to close, and the regional tier system that was in operation in 2020, caused significant disruption for many businesses.
You may also have suffered ill health, or had to operate with a reduced workforce, either for health reasons or due to significantly reduced footfall/orders. Whatever the reason for your business’ decline, a coronavirus business loan can provide the support you need.
The Coronavirus Job Retention Scheme, or furlough, has been extended multiple times and is now set to continue until the end of April 2021.
When you furlough members of staff, the government pays 80% of their salary up to a limit of £2,500 per month. As an employer, you’re responsible for paying the National Insurance Contributions (NICs) and pension contributions.
Alternative sources of finance, including factoring and invoice discounting, can provide reliable regular inputs of working capital that help you pay your bills on time, and avoid insolvency.
Other potential forms of alternative funding include asset-based finance, which is valuable for businesses that are asset-rich but cash-poor. Merchant cash advances are also useful for retail businesses that take card payments.
The economic effects of coronavirus on businesses have resulted in HMRC extending access to their Time to Pay scheme. If you’re in arrears with tax or believe you won’t be able to meet your liability in the future, it’s crucial to get in touch with HMRC as soon as possible.
You may be able to negotiate extra time to pay your tax arrears under a Time to Pay arrangement (TTP), and also avoid financial penalties. This typically offers up to 12 months extra time to bring your tax affairs into order, although you can’t include future payments in this arrangement.
If your business has been affected by coronavirus, but the problems are believed to be temporary, you may be eligible for a Company Voluntary Arrangement – or CVA. This effectively restructures your debts and allows the company to make a single monthly repayment, rather than paying each creditor individually under the contractual agreements originally made.
A CVA typically lasts for 2-5 years and offers significant advantages for viable businesses. Interest and charges may be frozen, and the arrangement allows you to retake control of the company once it’s in place.
Company administration can be a good option if you’re experiencing significant pressure from creditors, and you fear a winding up petition may be presented. Once the company enters administration creditors cannot take any legal action to wind it up.
This offers a ‘breathing space’ to establish the best options for the company. Restructuring through the sale of assets or staff redundancies may be an option, for example, or perhaps entering a CVA.
Depending on how badly the company has been affected by Covid-19, liquidation may be your only choice, however.
Company liquidation means your business will close down, and the process can be entered into voluntarily using a formal insolvency process known as a Creditors’ Voluntary Liquidation (CVL). So why would you voluntarily place your business into liquidation rather than waiting for a creditor to enforce it?
You have more control as a director, not only over the process itself, but also over your exposure to allegations of wrongful trading or director misconduct. If you believe your company has been affected by the pandemic to the extent that it’s become insolvent, it’s crucial to cease trade and obtain assistance from a licensed insolvency practitioner (IP).
Our partner-led team at Real Business Rescue can provide the trustworthy, independent professional advice you need at this time. If coronavirus has had a negative impact on your business, please get in touch to arrange a free, same-day consultation. We operate an extensive network of offices nationwide.
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