Government steps in with crisis funding during pandemic

24 Mar 2020

Cash is king. We hear it often, and we know it to be true.  However the shock to the economy caused by Government measures to bring coronavirus under control has brought many service industries and manufacturers more or less to a standstill. Funding for businesses will always be an area for concern for many business owners and executives; right now it’s an issue for all businesses. 

Last week (w/e 20 March 2020), the Government intervened in a way unprecedented in the private sector, with Chancellor, Rishi Sunak, announcing a suite of measures to support businesses through a period of inevitable disruption and hardship. These will no doubt provide some comfort for a variety of businesses that may have otherwise struggled to stay afloat and retain staff during this period of crisis. 

Whilst businesses are undoubtedly concerned with keeping their employees safe, they need help to stay afloat, and the Government is pledging to provide financial support for businesses affected. 

The Chancellor’s package of measures to support businesses include assistance for all businesses and in particular those aimed at small and medium sized businesses (SMEs):

1. Coronavirus Job Retention Scheme

HMRC will reimburse 80% of “furloughed worker’s” (workforce who remain on payroll but are temporarily not working during the coronavirus outbreak) wage costs, up to a cap of £2,500 per month.  Whilst the small print is yet to be disclosed, employment law specialist Rustom Tata has taken a look at the headlines and the questions recurring so far.  You can find his article (and register for updates) here.

2. VAT and Income Tax deferred 

Businesses will be allowed to defer VAT and Income Tax payments for three months. 

3. HMRC Time To Pay Scheme

Tailored to individual circumstances and liabilities, businesses can apply if they have missed a tax payment, or might miss their next payment due to COVID-19.

4. Coronavirus Business Interruption Loan Scheme

The Government is offering to support SMEs by providing them with access to working capital of up to £5 million in value and for up to six years. The Government will also pay to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will not face any upfront costs and will benefit from lower initial repayments.

From a lender’s perspective, the Government realises the need to give them confidence in providing finance, and will provide lenders with a guarantee of 80% on each loan. 

5. Statutory Sick Pay relief package for SMEs 

SMEs will be able to reclaim SSP paid for sickness due to the COVID-19 outbreak. 

6. Bank of England lending facility

Larger businesses will also be supported by a new lending facility from the Bank of England to support liquidity, helping them bridge coronavirus disruption to their cash flows through loans. 

7. Business Rates holiday

Introducing a 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England.
  • Real Estate expert Emily Wood has written about this. Please follow this link for further information.

Here at DMH Stallard, we advise every kind of business, large and small and we are on call to answer your questions and support your business by providing pragmatic, commercially viable advice on the latest Government guidance and in particular on funding options for your business.

The authors of this article are Lawrence Morley (Lawrence.Morley@dmhstallard.com), Jonathan Compton (Jonathan.Compton@dmhstallard.com) and both of whom are experienced in dispute resolution and commercial litigation. 

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