COVID-19 restrictions continue to affect businesses across the country. But some measures have been brought in that could help your clients keep their businesses afloat if they’re struggling. Understanding the options that are available to business owners is essential during these uncertain times.

In September, Chancellor Rishi Sunak unveiled a new set of measures to replace or complement those initially brought in as the extent of the pandemic became clear as part of the winter economy plan.

So, what are the measures available to help businesses large and small?

1. Paying employees with the Job Support Scheme

Helping businesses retain employees is one of the key motivators behind government support. With the furlough scheme now coming to an end, the Job Support Scheme will begin on 1 November. It aims to protect ‘viable’ jobs and is set to remain in place for six months, with a three-month review taking place.

For business owners, the new scheme helps pay for the salary of staff that are only able to go back to work part-time. For instance, if they work in the hospitality sector and are forced to reduce operating hours, the scheme can help top up the wages of employees.

To be eligible, employees must work at least a third of their usual hours. Businesses will need to pay employees for the hours they work. For the hours that employees can’t work, the government and employer will each cover one-third of the lost pay. The grant will be capped at £697.92.

This means employees that aren’t affected by the cap will receive a minimum of 77% of their normal wages even if they’re only able to work a third of their usual hours. For business owners, it can help retain key members of staff if they aren’t in a position to reopen fully but requires a commitment to pay some of the hours an employee is unable to work.

The Job Support Scheme is open to all business sectors. However, large businesses will need to prove their turnover has fallen during the crisis to be eligible.

As the COVID-19 situation develops, it’s expected that more regions will be categorised as a tier-three risk, leading to new restrictions that will force some businesses, including pubs, restaurants and gyms, to close. If a business owner is affected by these restrictions, a furlough style scheme will be available to help pay employees.

2. Government loan schemes and extended repayments

While the grant schemes offered to businesses are now closed, firms that need additional capital can still access the COVID-19 loan schemes with the option to pay over an extended period. There is a range of loan options available for business owners to consider:

• Business interruption loan scheme: This is a government-backed loan scheme that encourages lending as the government takes on a portion of the risk. This scheme is delivered by a range of lenders, including banks and asset-based lenders. Businesses can borrow up to £5 million in the form of term loans, overdrafts, invoice finance and asset finance. While the government backs these loans, the borrower remains fully liable for the debt, so business owners need to take repayments into consideration when planning.
• Coronavirus Future Fund: The Future Fund provides government loans to UK-based companies ranging between £125,000 and £5 million. However, the firm must at least match the government funding from private investors. The loans are designed to provide a safety net for businesses that rely on equity investments or are unable to access other business support programmes because they are pre-revenue or pre-profit.
• Bounce Back Loan scheme: The Bounce Back Loan scheme is designed to help SMEs access between £2,000 and 25% of their turnover, up to a maximum of £20,000. The government guarantees 100% of the loan to encourage lending. Eleven lenders are participating in the scheme, including retail banks. One of the key benefits is that no repayments are due for the first 12 months and there are no fees to pay. Business owners cannot apply if they’ve already claimed under the Business Interruption Loan scheme, but they may be able to transfer this loan into the Bounce Back Loan scheme to secure more favourable terms.

When these loan schemes were initially announced, businesses had six years to pay. Greater flexibility is now being offered, allowing firms to extend this to ten years if they choose. For businesses that are struggling, there is also the option to make interest-only repayments or suspend repayments for six months without affecting their credit rating.

Business owners can apply for all coronavirus loan schemes until the end of 2020.

3. VAT tax deferrals

Earlier this year, businesses were given the option to defer their VAT bill until March 2021.

However, this still would have left businesses potentially facing a bill that needed to be paid in a large lump sum that would affect their viability. If they choose to, business owners can now spread the cost over 11 smaller monthly payments, beginning in January 2021. These payments will be interest-free and could help business owners to spread the cost while business revenue is down.

4. Additional support for the hospitality sector

The hospitality sector has been one of the hardest hit by the pandemic restrictions.

In the Summer Statement, Rishi Sunak reduced the VAT rate for hospitality businesses from 20% to 5%. This VAT cut has now been extended until March 2021. The Chancellor said this move supports more than 150,000 businesses and 2.4 million jobs.

From a business owner perspective, it’s hoped that the VAT cut will boost customer demand and give businesses in this sector confidence to continue trading. However, the VAT incentive will need to be balanced with restrictions for business owners, such as the 10pm curfew that means restaurants and bars are being forced to close early.

Keeping clients informed of changes

With the situation developing rapidly, it’s to be expected that there will be changes and perhaps additional support measures for businesses over the coming months. As the personal finances and wellbeing of business owners are often intertwined with that of their business, we aim to provide clear information that can help them plan for the short and long term. If you’d like to work collaboratively to provide support for businesses, please get in touch with our team.