How to access business finance during the coronavirus crisis

The coronavirus outbreak is having a major impact on businesses in all sectors. Here, we've listed what financial help is available now and what's coming soon.

19 March 2020

The government recently announced a state-backed loans programme and a package of tax breaks and other measures protect businesses affected by the fallout from the virus. This was upgraded in a conference on 20 March that confirmed that all cafes, bars, pubs and restaurants must close their doors to the public. Since 23 March, all non-essential shops have been closed.

Here, we break down the details of the new government support available to small businesses, as well as programmes that were set up before the virus outbreak and are still relevant.

What new government business finance is available?

CBILS Information image

Coronavirus Business Interruption Loan Scheme

The largest of the new funding measures is the Coronavirus Business Interruption Loan Scheme (CBILS), which will be delivered via the British Business Bank (BBB). The scheme was first announced on 11 March before being upgraded on 17 March to enable loans of up to £5m per business. It makes up a large part of the government's £330bn COVID-19 response package.

The scheme is now live and businesses are urged to contact their finance lender for information on how to apply. There is also a FAQ page (PDF) for SMEs.

260320 FinanceAvailable

What finance is available?

The CBILS enables businesses to gain access to business loans, invoice finance, overdrafts and asset finance.

Term loans and asset finance agreements are available for up to six years. The terms for overdrafts and invoice finance facilities are up to three years. Loans of less than £250,000 are available on an unsecured basis.

How is it specific to coronavirus?
  • For businesses: the first 12 months of interest are covered by government (upgraded from six months) to help SMEs recover from the impact of the virus outbreak
  • For lenders: the government gives a guarantee for 80% of the loan to mitigate the risks of lending amidst coronavirus uncertainty

CBILS Details

Which businesses are eligible?

Eligibility information is available now (PDF). In short, the business must:

  • Be based in the UK and with annual turnover of no more than £45m
  • Have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short- to medium-term difficulty.
How can I apply?

Speak to your bank, or any other of the 40+ accredited lenders.

Will iwoca be able to offer this?

We are working with the government on becoming accredited as soon as possible.

For a more detailed look at CBILS, click here.

What other new measures for businesses are live now?

VAT holiday

The next quarter of VAT payments will be deferred without interest or penalty, so no business in the UK will be required to pay VAT covering the period from now until 30 June 2020. You don’t need to tell HMRC before deferring payment, just make sure to cancel any direct debit you have set up with your bank to postpone your VAT payment to a later date. All businesses will have until the end of the financial year (31 March 2021) to repay those bills.

Deferred Self-Assessment payment

If your second self-assessment payment is due on 31 July but COVID-19 has impacted your ability to make this payment date, you can apply to defer payment until 31 January 2021. You will still need to submit your VAT returns to HMRC on time.

HMRC Time To Pay Scheme

Small and medium-sized businesses who can’t afford to pay their tax bills can ask HMRC for a “time to pay” agreement to suspend debt collection. All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs. During the pandemic, the usual 3.5% annual interest on deferred payments will be scrapped.

Each individual or business will be assessed on a case by case basis and you can apply by calling HMRC on 0800 024 1222.

Coronavirus Job Retention Scheme

Employers can use the Coronavirus Job Retention Scheme (CJRS) to claim 80% of usual monthly wage costs for their employees on a leave of absence, up to £2,500 per month for three months starting 1 March 2020. In addition, employers can also claim for the employer national insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

To find out how to make a claim, visit the government guidance page

Small Business Grant Fund

The Small Business Rate Relief (SBBR) and Rural Rate Relief (RRR) are pre-existing schemes that around 700,000 businesses in England are eligible for.

You can call your local authority to see if you’re eligible for this relief.

Beyond that, the government has set aside additional funding for local authorities to support businesses that already pay little or no business rates through these schemes. This will result in a one-off grant of £10,000 for businesses which were eligible for SBRR or RRR on 11 March 2020. The funding will be available soon, so it could be worth checking with your local authority to see if you're eligible.

Support for businesses in the retail, hospitality and leisure industries

Due to the impact on the retail, hospitality and leisure industry, the government is introducing a business rates holiday for those sectors spanning the 2020 to 2021 tax year. Broadly speaking, qualifying for the scheme rests on your business being based in England and operating in the retail, hospitality and/or leisure sector. You can learn more about eligibility here.

If you qualify, the government has said you will be automatically put forward for the business rate holiday – with no action from you. However, local authorities may have to reissue your bill to provide this support. You can estimate your business rates savings here.

A £25,000 grant will also be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000. For businesses with a property of rateable value up to £15,000, these might be eligible for a £10,000 grant.

If you’re eligible for these cash grants and have a direct debit set up to pay business rates, your local authority will write to you about your grant eligibility, so no need to take any action.

If you don’t use direct debit to pay business rates, or if you qualify for Small Business Rates or Rural Rates Relief, your local authority might not hold any bank account details for you. To ensure your grant is awarded, you may want to visit the website for your local authority or contact them directly to confirm your business’s bank details.

Self-employment Income Support Scheme

The government has suspended the minimum income floor for self-employed people from 6 April 2020, giving people who work for themselves full access to Universal Credit at an equivalent rate to Statutory Sick Pay for employees. Universal Credit itself has been expanded, with an additional £1,000 a year added to the standard allowance for the next 12 months.

If you’re unwell and unable to work, you might also be able to claim New Style Employment and Support Allowance, with or instead of Universal Credit. Find out more here.

Coronavirus updates for SMEs

Coronavirus: stay updated

Our coronavirus bulletin covers all the key developments and delivers a digested summary straight to your inbox. We’ll send these out whenever there are key updates we think will help your business.

What new measures are coming soon?

Government support for self-employed

On 26 March, the government announced it's offering self-employed people 80% of their earnings as a taxable grant. Backdated to March and slated to be live in June, it will apply to those who make £50,000 in trading profits per year or less – which is approximately 95% of the self-employed population. The one-off grant will equate to a maximum of £2,500 a month for three months. HMRC say they will be in touch with those who are eligible. As of 30 March, the application is not yet available.

HMRC defines someone who is self-employed if: “they run their business for themselves and take responsibility for its success or failure.” Read more on this here.

Statutory Sick Pay Relief for SMEs

New legislation will soon be put in place to allow SME businesses and employers to reclaim any Statutory Sick Pay (SSP) they’ve paid for absence due to sickness from COVID-19.

  • At the moment, this refund will cover up to two weeks’ Statutory Sick Pay per eligible employee who has been off work because of COVID-19.
  • Employers with fewer than 250 employees (as of 28 February 2020) will be eligible
  • Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
  • Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP note
  • This legislation is expected to be passed shortly and is likely to be backdated to 13 March 2020

COVID-19 Corporate Financing Facility

The new COVID-19 Corporate Financing Facility will allow the Bank of England to buy short term debt from larger companies. It is designed to help businesses affected by the short-term funding squeeze, and enable them to finance short-term liabilities.

The government and Bank of England have stated that all UK businesses are eligible. However, the scheme is designed for larger companies, so there may be restrictions around annual revenues or business size. The scheme will be available early in week beginning 23 March 2020 with information about how to access the scheme available here soon.

Financial support for R&D and innovation

Innovate UK Smart Grants

This government-backed funding competition went live in January and though it may not be applicable to all, it does enable some businesses the “opportunity to apply for a share of up to £25 million to deliver ambitious or disruptive R&D innovations that can make a significant impact on the UK economy.”

The competition is open now and closes on 22 April. You can apply here.

R&D Tax Credits

If your business is working on an innovative science or technology project, you could be eligible for tax relief. In order to benefit from this scheme, the R&D project must relate to your company’s trade and be attempting to overcome a problem that could not easily be solved by a professional in your field. On top of these eligibility criteria, your business will need to have 500 staff or less and a turnover of under £92m (€100m).

If you meet these criteria, SME R&D relief could allow you to deduct an extra 130% off qualifying costs from your yearly profits.

For more information and to apply, visit the government page on R&D relief.

Patent Box (tax relief on profits from patented inventions)

In order to support innovative SMEs, business owners with patented inventions can apply to this government scheme in order to pay a lower amount (10%) of Corporation Tax. To be eligible for the Patent Box, your business must profit from a patented invention granted by an approved body (see full list here), and actively contribute to developing the patented product.

For more detailed information on this scheme, click here.

Financial support for new businesses and startups

New Enterprise Allowance

If you’re just starting out as a business owner, the New Enterprise Allowance (NEA) could be a good way to get your project off the ground. The government scheme offers financial support of up to £1,274 per week for 26 weeks, along with mentoring services and workshops. The scheme seeks to reward those with ambitious and innovative business proposals.

In order to be eligible for NEA, you or your partner must be 18 or over and receive either Universal Credit, Jobseeker’s Allowance or Employment and Support Allowance. Alternatively, if you receive Income Support you could also be eligible.

To get started with NEA you’ll need to speak to a Jobcentre Plus work coach who’ll chat through your business idea with you, and help you work out if you’re eligible.

For more information, visit the NEA page here.

The Start Up Loan

The Start Up Loans Company was set up to access affordable finance and mentoring support. A subsidiary of the BBB, it delivers the Government’s Start Up Loans programme – a platform designed to help new and early-stage UK businesses.

New companies can apply for a Start Up Loan of £500 to £25,000, which is an unsecured personal loan backed by the government. Applicants can get free support and guidance on business plans, and successful applicants get up to 12 months of free mentoring.

You can apply now on the Start Up Loans website.

The Prince’s Trust

The Prince’s Trust specialises in working with young entrepreneurs to turn their business ideas into a reality. Aimed at 18-30 year-olds, the charity offers start-up business loans of up to £5,000 at 6.2% APR representative, meaning you could get an injection of capital at a competitive rate. On top of this, the team is also available to give advice to those new to owning a business or those in need of assistance. They offer advice on budgeting, tax and insurance queries, and even offer start-up business grants in special circumstances.

For more information, visit their business loans page.

What else is available?

Finance support for your business

The gov.uk website has a tool for locating government-backed support and finance for business, which can be searched by sector, region, support type and the stage and size of your business.

There are more than 171 schemes in the database, so it’s well worth exploring and applying to relevant programs and platforms directly.

Pay it forward

Enterprise Nation and Crowdfunder have teamed up to launch the #PayItForward campaign, which allows businesses to set up a crowdfunding page for free. The project is a really easy way for businesses to organise voucher schemes that enable them to get cash from their loyal customers now, in exchange for goods or services down the line.

Covid Credit for self-employed people

Covid Credit is a proof of concept tool to help self-employed workers demonstrate loss of income from COVID-19 to HMRC. It allows sole traders in the UK to prove their last 12 months of earnings and to self-certify lost income by connecting to their bank account using Open Banking. The service is ready to go live, but its creators are waiting on input and support from the government. Find out more here.

How iwoca can help

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

Our Flexi-Loan is a working capital solution built specifically for the challenges of running small businesses. For more than eight years, our customers have used it to overcome unexpected costs and provide liquidity in times of uncertainty.

Find out how we can help your business by giving us a call or applying online. 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 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.

How iwoca can help your customers pay you

It’s likely that your customers that have been affected by COVID-19 may be experiencing sudden cash flow problems and staff shortages. This may mean that they can’t pay their outstanding invoices on time.

If you’re worried about this, get in touch with your customers to remind them of the invoice and discuss whether they’ll be able to pay. This way you’ll get a better understanding of what your incoming finances look like and be able to discuss options with them.

If your customers are struggling to pay, you may need to offer them extended payment terms. If this creates a problem for your business, or you are worried about doing this for the first time, sign up for iwocaPay or give us a ring on 0203 778 0549. We can help you offer your customers an additional 90 days to pay, while you get paid up front. And we take on any credit risk and admin, so we’ll make sure your business is protected from bad debt and late payments.

Get paid up front while your small business customers spread their costs over 90 days

words by <span>{authorName}</span>

Dan Smith is Content strategist lead at iwoca and editor of Insights. He's written for a number of publications such as The Guardian and WIRED on topics ranging from finance to sport.

Article updated on: 7 April 2020

Coronavirus updates for SMEs

Our coronavirus bulletin covers all the key developments and delivers a digested summary straight to your inbox. We’ll send these out whenever there are key updates we think will help your business.