Today the Chancellor announces further support for businesses and individuals as the government looks to manage the virus whilst protecting jobs.
We are in a very different position to back in March, when there were many uncertainties and the measure implemented were for immediate support and thought temporary. We now know that further restrictions are likely for the next 6 months, and the hence the support announced today.

The primary goal of the next stage is to protect jobs, yet the current Job Retention Scheme, more commonly known as "furlough" will finish at the end of October 2020. The new scheme is aimed at protecting genuine jobs, and not to support those that can only survive through the furlough scheme.  

Lucinda Matkin of LM Insolvency welcomed the new scheme stating "it offered continued support in unprecedented times, but also acknowledged that support must be focused viable businesses" she went on to say" It is clear that not all jobs will be saved. nor all companies, but this is not possible for any government. The rate of insolvencies have been significantly lower than the previous year, with company insolvencies for the month of August 2020 being 43% lower than the same time last year. Likewise bankruptcies were also down 43% on the same month last year. These statistics illustrate the need to support what the chancellor termed viable jobs and not just those that can survive through the furlough scheme, as many businesses that would originally have been insolvent have in effect been given a lifeline, or the inevitable has been delayed"

So what is the continued support?
There are two elements;

1. job protection; and
2. cash flow support

Job protect comes in the way of a New Job Support Scheme with three objectives;

1. to support viable jobs
2. to  support all all those businesses that need it
3. support all businesses even those that had not used furlough

so, what is the Job Support Scheme?
The scheme will run for 6 months from 1 November 2020 (follow on from the furlough scheme which will end). Its aimed at viable jobs, so is support for those working. 
It is support for those working at least one third of their normal hours, which a company/employer will pay for as normal.
For the remainder which they do not work, the employee will be supported further by the government and the employer, with each contributing one third of the pay for normal hours not worked.
All small and medium sized businesses will be eligible to claim for the scheme, but large business will need to prove they have been affected with a fall in turnover. The scheme will also be open to those that did not utilise the furlough scheme.

The Job Retention Bonus and Kick Start Schemes remain in place and are unaffected by the new scheme.
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The second part of the support announced today by the chancellor is aimed at support the cash flow of businesses, whilst they protect jobs.

There are no new loan schemes or grants announced rather an extension of existing schemes.

Bounce Back Loans
Bounce Back Loans gave a £38 billion boost to businesses, and originally were interest free for year and then repaid over 6 years. The "Pay as You Grow" announced today means these loans can now be paid back over a period up to 10 years, almost halving the monthly payments, companies also have options to make interest only payments for a period of time and take 6 months repayment holiday if really struggling. Further more these measure would not impact the credit score of a business using them.

Lucinda Matkin of LM Insolvency said "this will help businesses as they look to recover, but I hear of many businesses that took a minimal loan amount, thinking the impact would only be temporary, and under current terms are unable to top up that loan. Now that it is clear we face longer term restrictions, an option for those that had not utilised the support fully would have been extremely beneficial to those businesses that miscalculated the impact of the outbreak or the longevity of it"

Business Interruption Loans (CBILS)
The government backed guarantee has also been extended to 10 years for these loans, and the deadline for applying has been extended.

Vat
Over £30 billion of vAT was deferred to March 2021. To help cash flow rather than the a lump sum becoming due, companies will be able to spread the cost over 11 months interest free.

​In addition the reduced VAT rate of 5% for the hospitality industry will remain at 5% until the 31 March 2021.

Self Assessment Tax
Deferred Self Assessment payments due January 2021, can also be spread over 12 months from next January, rather than a lump sum becoming due.

On 27 April 2020 the Chancellor announced a new Bounce Back loan scheme for small businesses hit by the impact on the pandemic, allowing businesses to apply for loans up to £50,000, with government guaranteeing 100% of the advance.

Despite the announcement by the Chancellor he is ‘unconvinced’ by universal government guarantee.

Rishi Sunak reiterated that he “remained unconvinced” of the case for rolling out a 100% government guarantee across all the state’s coronavirus loan schemes. 
“We shouldn't ask taxpayers to bear all the risk of lending almost unlimited sums to businesses who may have very little prospect of paying those loans back – and not necessarily because of coronavirus, said the Chancellor. “Instead, the new Bounce Back Loans carefully target the extraordinary level of state support at those who need it most.”

So what is the New Loan Scheme?
In summary;

• businesses will be able to borrow between £2,000 and £50,000 and access the cash within days
• loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form

The new scheme, will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.

Note: the guarantee is to the lender and not the business, the business will still be responsible for repaying the loan, and debt will still not be suitable for some smaller businesses


The loans will be easy to apply for through a short, standardised online application (just a two page form with no forward-looking business viability tests or eligibility criteria), making this a Fast Track process. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.

The majority of landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics. I personally have also heard of cases of companies struggling with potential rent increases despite the current outbreak.

• Government to introduce temporary new measures to safeguard the UK high street against aggressive debt recovery actions during the coronavirus pandemic;
• The government will temporarily ban the use of Statutory demands (made between 1 March 2020 and 30 June 2020) Statutory demands issued to commercial tenants will be temporarily voided, where a company cannot pay its bills due to coronavirus;
• Winding up petitions issued the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) to commercial tenants will also be temporarily voided, where a company cannot pay its bills due to coronavirus
• Government is also laying secondary legislation making changes to be made to the use of Commercial Rent Arrears Recovery (CRARs), building on measures already introduced in the Coronavirus Act to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.
• As a result landlords and investors asked to work collaboratively with high street businesses unable to pay their bills during COVID-19 pandemic. Tenants are however, being asked to pay what they can afford to pay, and for Landlords and tenants to work together.

This new legislation will be in force until 30 June, and can be extended in line with the moratorium on commercial lease forfeiture.

These measures come on top of a substantial package of business support measures, including a moratorium on evictions for commercial tenants for at least a 3-month period, which includes a suspension of forfeiture rights, which prevents all commercial tenants from being removed from their properties until 30 June.

Should you need assistance with negotiations or help and support considering the longer term options please do not hesitate to contact our Licensed Insolvency Practitioner for a FREE consultation on Tel: 07972928153 and email: lucinda@lminsolvency.co.uk

SOME CLARIFICATION
The truth of the matter is, this was announced by the Chancellor in the Budget 2020 as a scheme to temporarily replace the Enterprise Finance Guarantee (EFG) Scheme.

Both are government backed lending schemes, in which the lenders can seek personal guarantees and security.

The government back guarantee is for the lender, not the business. The guarantee is designed to facilitate the lending by banks in uncertain times, giving them more confidence to do so.

This is also a loan or overdraft, and there is a responsibility for the finance to be repaid by the business (just like any finance facility). If a business is later unable to repay the finance the lender has a duty to pursue all options to recover the monies, including from directors personally where personal guarantees are given. The government guarantee will only take effect when the lender is unable to recover the funds.

SO WHAT ARE THE IMPROVEMENTS?
As mentioned the scheme temporarily replaces the EFG Scheme, but with added benefits. These are:

• A higher level of backing to lenders, or 80% compared to 75% under EFG, as such lenders should be more prepared to lend to SMEs
• There is no guarantee fee for SMEs under the CBILS, unlike EFG
• The facilities are interest free in the first 12 months, so smaller businesses will benefit from lower initial repayments; and
• Any lender-levied fees are also covered in the first 12 months, so smaller businesses will benefit from no upfront costs.; and
• There is a higher maximum facility level of £5 m instead of £1.2 m
• At the discretion of the lender the need for security may be waived, and Primary Residential Property (PPR) cannot be taken as security under CBILS
• The scheme is also available to more businesses with a turnover of no more than £45m, (whereas EFG was a limit of £41m); and
• The borrowing proposals have to be for businesses that would be viable, if it were not for the impact of COVID-19, and will enable to the business to trade out of any short-to medium term difficulty. EFG was only for facilities considered viable under the lenders commercial terms.

In conclusion, the CBILS is an Improved version of the EFG.

For further details on CBILS see our COVID-19 HUB at https://www.lminsolvency.co.uk/funding--support-for-businesses-effected-by-covid-19.html

KEY FUNDING FOR BUSINESSES

GOVERNMENTS PLAN
The Prime Minister and Chancellor announced a staggering £330 billion support package for businesses. Made up of several key schemes

• A Job Retention Scheme
• Coronavirus Business Interruption Loan Scheme
• Deferment on VAT
• Deferment on Income tax under Self Assessment system
• Grants and Rate Relief

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KEY FUNDING AND SUPPORT FOR BUSINESSES
There is a lot of information already with regards to support from Government and it can be confusing of what is available and where to go for that support. In our video below we talk through the key financial support and funding available for businesses to help you get to grips with it all. ​
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