COVID-19 – what it means for small business

The coronavirus outbreak presents challenging conditions for businesses. Here’s what you need to know about the impact of the virus on business operations, insurance and finance.

12 March 2020

The details of the COVID-19 outbreak are developing quickly, and information from the Government is being released day by day. We will update this page regularly. For the latest guidance and measures from the Government, visit the websites of the UK Government, the Scottish Government, the Welsh Government or the Northern Irish Government.

On 24 March, the prime minister announced all non-essential shops must close their doors. This came after cafes, bars, pubs and restaurants were asked to shut to the public from the morning on 21 March. Nightclubs, gyms theatres and cinemas are also banned from opening.

The UK Government has published its Coronavirus Action Plan. While these measures could help prevent or slow the spread of the illness, they will have a serious impact on trade and business.

Jump to our article specifically about business finance during the outbreak.

What’s the general advice?

The NHS has a range of advice on how to avoid becoming infected with and spreading coronavirus. In relation to business, the website has thorough guidance for employers.

The information includes:

What about advice for small businesses?

Specifically for small business, the Federation of Small Businesses (FSB) has collated information and advice for employers in relation to COVID-19. In addition to the basics covered by the government, it includes guidance on:

For the full information, visit the FSB website.

What’s the government doing for business?

The chancellor, Rishi Sunak, has now set out three budgets in one week, detailing increasing levels of investment and support for the business community. For the full break down of the financial options available, visit our page dedicated to coronavirus finance for small businesses.

The headlines include:

  • Coronavirus Business Interruption Loan Scheme: a programme enabling businesses to access loans of up to £5m with 12 months' interest-free payments. It will be available in the week commencing 23 March 2020.
  • VAT holiday: VAT payments will be deferred for the coming quarter, so no business will owe VAT from now until mid-June.
  • Time To Pay Scheme: SMEs can ask HMRC to suspend debt collection. This is assessed on a case-by-case basis.
  • Support for businesses that pay little or no business rates: a one-off grant of £10,000 to businesses that already pay little or no business rates through the SBBR and RRR schemes.
  • Support for businesses in the retail, hospitality and leisure industries: business rates have been abolished for this year, and a £25,000 grant is available to certain businesses operating in small premises (with a rateable value between £15,000 and £51,000).
  • Universal Credit for self-employed: people who work for themselves now have access to Universal Credit at an equivalent rate to Statutory Sick Pay. Universal Credit has also been expanded by an extra £1,000 a year.

More details will be announced in the coming weeks. For information on the measures unveiled so far, click here.

What’s happening with insurance?

As of March 5th, COVID-19 became a notifiable disease in the UK. According to the government, this means “registered medical practitioners (RMPs) have a statutory duty to notify the ‘proper officer’ at their local council or local health protection team of suspected cases of certain infectious diseases.”

In terms of insurance, according to Insurance Business Mag this should make it easier for businesses to claim against issues they face related to the outbreak. But, warns the Association of British Insurers, most business insurance policies are still “unlikely” to cover losses.

The advice from the FSB is to check policy wording thoroughly, as policies may not provide adequate protection against the impact on trading due to an outbreak of disease. Instead, they advise checking to see whether Business Interruption cover is included in the commercial insurance policy, as this may provide a provision for this kind of scenario.

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What about finance?

In addition to the Chancellor's stimulus package, the Bank of England has cut UK interest rates from 0.75% to 0.25%, with the next rate update due on 26 March. The emergency move is designed to lower financing costs to encourage borrowing and investing, stimulating economic growth at a time of low optimism in the economy.

However, Stephen Jones, chief executive of UK Finance has suggested businesses who expect to be impacted by the COVID-19 outbreak should contact their finance providers as soon as possible.

“Banks, building societies and credit card providers understand that some of their customers may be worried about the effect that contracting the Coronavirus (COVID-19) could have on their finances, for example due to a drop in income or because of unexpected expenses or bills to pay,” he said in a statement released on 5 March. “All providers are ready and able to offer support to their customers who are impacted directly or indirectly by COVID-19, which could include offering or increasing an overdraft or allowing repayment relief for loan or mortgage repayments: asking for help early is key.”

The UK’s major banks have announced individual measures:

  • Barclays’ options for business customers include a 12month capital repayment holidays on existing loans of more than £25,000 and increased overdraft facilities.
  • RBS has said business loan repayments may be deferred by up to three months for those in financial difficulty
  • NatWest has pledged £5bn Working Capital Support for small businesses during the Coronavirus outbreak
  • The Lloyds Banking Group said it would be open to requests from small businesses for overdraft extensions and other support

We’re here to help

Now, as ever, we are committed to making finance accessible to UK small businesses.

We designed our Flexi-Loan as a working capital solution for small businesses. Our customers, such as Simply Plants and Aldershot Play Centre, have used it to overcome unexpected costs and provide liquidity in times of uncertainty.

It’s easy to find out how we can help your business too. Existing customers can contact their account manager to discuss additional funding or top-ups.

If you're not an iwoca customer but are interested in learning more, call us on 020 3778 0274 or apply online. Our application takes five minutes from start to finish and, as a responsible lender, we take a 360-degree view of a business' performance. This helps us to offer a solution that is affordable to your circumstances.

Once approved, customers can transfer as much as they need to their bank account, and the funds will typically be in your account in hours. We only charge interest for the days you have the money and there are no early repayment fees.

Issues with payments

If your customers are in an industry heavily affected by the Coronavirus, they might experience a sudden cash flow gap and struggle to pay their invoices. Alternatively, if their employees fall ill, they may find it difficult to maintain their regular processes and pay on time.

If you’re worried about this sort of situation, contacting your customers to remind them of the invoice and discuss whether they’ll be able to pay will help you understand what your incoming finances look like.

If your customers do struggle to settle what's owed, you may need to offer extended payment terms. If this creates a problem for your business, get in touch with our iwocaPay team. We can help you offer your customers an additional 90 days to pay, while you get the funds up front.

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This article was created by the Insights team at iwoca.

Article updated on: 23 March 2020

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