Coronavirus Support is Changing
While COVID-19 is still present in the UK, life is steadily getting back to normal, with a reduction in restrictions, and businesses reopening. With this, the government’s coronavirus support schemes are steadily winding down. However, support for businesses still struggling with the pandemic’s impact won’t disappear overnight. It would be better to think of the coronavirus support as changing rather than ending altogether.
What coronavirus support is ending?
When the pandemic reached the UK in early 2020, the Corporate Insolvency and Governance Act 2020 introduced several support schemes to stop mass unemployment and company closures.
One of the last government support measures, the Coronavirus Job Retention Scheme, more commonly known as the Furlough Scheme, is due to wind down on 30th September 2021 after several extensions.
This ending of support follows the closure of the government’s support loan schemes. The Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) both closed to new applications on 31st March 2021, while the Self-Employment Income Support Scheme (SEISS) for sole traders is set to end on 30th September 2021.
What support is still available?
While the previously mentioned coronavirus support measures are ending, support for businesses affected by the pandemic hasn’t gone away altogether.
Businesses with a bounce back loan that needs repaying can still use Pay As You Grow (PAYG) flexible repayment options. This means businesses can make interest-only payments for six months, up to three times in the loan’s duration. They can delay payments for six or eighteen months following taking out the original loan, and payments can be paused after the first instalment.
Additionally, the government’s Recovery Loan Scheme continues to grant businesses access to asset and invoice finance, loans, and overdrafts from several accredited lenders, allowing businesses to borrow up to £10 million, with no requirement for personal guarantees for amounts up to £250,000 if the borrower is liable, and the government guaranteeing the lender 80%. The scheme is expected to remain active until 31st December 2021.
Additionally, the suspension of evictions for unpaid commercial rent arrears will remain in place until 25th March 2022. This will help businesses forced to close during the pandemic. Landlords cannot use a winding-up petition to circumvent this protection.
New protection measures
In addition, new insolvency measures have been introduced for those still requiring assistance and breathing space.
The debt threshold allowing a winding-up petition to be filed, currently at £750, is to rise to £10,000. It’s hoped this will prevent companies from going out of business due to relatively small amounts of debt. Creditors are also required to seek debt repayment proposals for businesses that owe them money and allow the debtor 21 days to respond before they can try and wind up the company.
It’s hoped that this will allow companies breathing space to repay debts they may have incurred due to the pandemic.
How we can help
If you find your business has become insolvent because of the pandemic and it is beyond the help offered by the remaining support schemes, there are other options available. Speak to our initial advice team to assess your circumstances and help you find the best solution for your business.
- Alternative funding options
If you find the withdrawal of coronavirus support leaves your business struggling to cover its outgoings, it could benefit from alternative funding through commercial finance. Your options could include invoice finance, which can help businesses awaiting payment of overdue invoices and maintaining a healthy cash flow. Alternatively, you could explore asset finance to purchase extra equipment to keep your business and staff covid-safe. Bridging loans may help cover one-off, expensive outgoings, such as bringing premises in line with safety regulations, while hire purchasing allows the business to purchase new assets while spreading the costs.
More commercial finance options - Repaying the debt in instalments
If the pandemic has seen your company fall into insolvency with debts it cannot repay, you could benefit from repaying the debts in affordable, monthly instalments. A Company Voluntary Arrangement (CVA) allows an insolvent company to do that through a legally binding agreement with its unsecured creditors. A CVA could be useful to companies unable to cover their usual outgoings either due to a lack of trade or loss of takings due to the pandemic.
More on Company Voluntary Arrangements - Restructuring is needed
If a company has been forced to close for an extended period, and thus, is unable to repay its debts, they could be of such a level that more drastic restructuring may be required. Administration puts a licensed insolvency practitioner in charge of the company, where they make the necessary changes to make it more attractive to potential buyers. These changes could include selling off the unprofitable parts of the company.
More on administration - Thinking of closing the company
The pandemic has had a marked effect on countless businesses, and sometimes the debt could be of such a level that the most sensible option is to close. A Creditors Voluntary Liquidation (CVL) allows a company to close in an orderly manner if the cost of coronavirus and the consequential loss of takings and business is too much for the company to recover from. Staff are made redundant, and the company is closed, drawing a line under its debts, and writing off any unaffordable amounts. From here, the directors can choose to walk away or continue the business in a new limited company if the circumstances allow it.
More on Creditors Voluntary Liquidation (CVL)
Summary
While the government’s main support schemes have either closed or are preparing to wind down, support for businesses affected by coronavirus is changing rather than being scrapped altogether. Smaller measures like the Recovery Loan Scheme and Pay As You Grow repayment options remain.
Additionally, the debt threshold for winding-up petitions has been raised to £10,000, and creditors will have to seek a debt repayment proposal with the debtor before they can pursue winding-up action. Finally, should the worst happen, and the company becomes insolvent, you can speak to an insolvency practitioner to discuss which option would best suit the business’ circumstances, whether that involves saving or closing the company. These new and existing precautions mean those still struggling with the pandemic’s effects won’t be left out on a limb.