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I can’t afford to pay staff when they return from furlough

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I am worried I will not be able to pay my staff once furlough ends

The Coronavirus Job Retention Scheme (CJRS) has helped businesses to retain staff during the pandemic, offering vital support when many were unable to operate. Businesses continue to experience severe operational and financial issues, however, as time progresses.

If you’re in this situation and can’t afford to pay staff when they return from furlough, what can you do? Are there any other government initiatives that could help, or should you try to secure additional finance to further support the business?

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Coronavirus Job Retention Scheme 

The Job Support Scheme was due to come into force in November, however, the Coronavirus Job Retention Scheme has now been extended until the end of September 2021. The purpose is to reduce the number of redundancies businesses have to make, and support employers in keeping staff on over the winter months.

The scheme will pay up to 80% of employee wages up to £2,500 a month. The government will cover the whole cost until July where employers will need to cover 10% of a furloughed staff's wages. This will increase to 20% in August and September.

Coronavirus business loans

The deadline for applications for coronavirus business loans – the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) – has been extended by the Chancellor to 31st March 2021. This will then be replaced by the Recovery Loan Scheme which will be open for applications until the end of 2021.

These government-backed loans provide emergency funding if you’re eligible and feel they’re the best option for your business. The cash injection can help you pay your staff until business improves, and provides some financial stability in this time of crisis.

Alternative finance may suit your business

Securing a traditional bank loan can be a lengthy process, and might not be the right form of finance for your business. Alternative funding, on the other hand, may be more flexible and faster to access.

A successful application for alternative finance doesn’t always rely on a good credit record, and there’s a range of options that can suit different types of business.

  • Invoice finance is based on the value of your unpaid invoices, and provides an injection of cash every time an invoice is issued – typically within 48 hours
  • If you own assets of value, asset-based finance can help you access a cash lump sum whilst still being able to use the assets on a sale and leaseback basis
  • Merchant cash advances help retailers use the value of their card sales to provide vital working capital

But what happens if you’re unable to pay your employees when they return from furlough, and can’t access vital finance?

Other rescue and recovery options

If your company is insolvent, there are a number of formal insolvency procedures that can help the business survive. Company administration is a process that provides a respite from creditor pressure. It can help you put in place a plan for the future, and potentially protect jobs.

Another option might be a Company Voluntary Arrangement (CVA) whereby business debts are formally renegotiated. You continue to trade through your financial difficulties once the arrangement is in place but pay an affordable amount each month, which is distributed as agreed with your creditors.

Need to speak to someone?

If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080

It’s crucial to be aware of your business’ financial status when you can’t pay your staff, as you may have slipped into insolvency. Real Business Rescue are insolvency specialists and can help you find the best way forward.

Please contact one of the team to arrange a free same-day consultation. We operate an extensive network of offices around the country, and can provide the reliable independent advice you need.

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