By Andrew Suddes
The unprecedented scale of disruption that has struck us all very significantly in the last two weeks is inevitably going to cause cash-flow challenges for most businesses. The Government moved quickly to protect the economy and pledged to help businesses get through the disruption with a broad range of measures.
| Job Retention Scheme | Support to pay business rates |
| Deferred self-assessment | Support to self-employed partners |
| Deferred VAT Payments | Business Interruption loan scheme |
More information about the job retention scheme and the Self Employed Income Support Scheme (SEISS) can be found in a recent blog by Neil Adams. Here, I have focused on the help that is available through the Corona virus Business Interruption loan scheme.
Cash-flow disruption in farming businesses
There are a host of Covid-19 related scenarios that could affect your business, if your business is applicable to any of the points below, then you may be at risk of a cash-flow crisis. The scenarios are as follows:
- The business is highly reliant on the food service sector
- Unable to sell stock via the local auction mart because it is closed
- Supply chain is disrupted because of a factory lockdown, shortage of staff or failure in distribution
- Farming staff needing to self-isolate, resulting in loss of day to day operations
- Raw materials (e.g. feed) unable to be delivered to the farm as agreed and the subsequent effects on production
- Income is lost because the customer buys direct and can no longer visit, such as farm tourism or retail enterprises
Coronavirus Business Interruption Loan Scheme
These scenarios will likely pose a threat to your business and your cash-flow. The good news is the Government have pledged to provide £330bn of lending to UK firms. However, they are only providing a guarantee for 80% of the loans, with the remaining security supplied by banks. This means accessing the government loan guarantee is not necessarily a simple process.
For detailed information on how to access funding please go to the British Business Bank website, a government backed portal.
Feedback to me from the banks so far has been that they are keen to help, and they see the Government support as a back up where circumstances mean they are not able to lend. Many banks have already pledged finances to their own Coronavirus support funds and by instinct are looking to support businesses in the usual way they can.
However, getting funds to business is proving tricky, with many bank staff either working from home or having to self-isolate. Couple this with an unprecedented level of demand on their services for short-term assistance and you quickly conclude that help may not be given straight away.
What will you need to prepare?
If you need funding, you will need to provide the evidence to show that you can afford to repay the loan.
This is likely to include:
- Business plan
- Management accounts
- Cash flow forecast
- Historic accounts
- Details of assets
Here at Promar, we can work with you to pull this information together in an efficient and timely manner.
Another guiding principle is that banks will not use the Government funds to support a failing business.
Obtaining funding
So, you must prove the following:
- You have a viable business that was solvent before Coronavirus hit
- The cashflow problem that you have is a direct result of the Coronavirus outbreak
- You have sufficient security to obtain funds
The last point is crucial. If you have existing security with the bank and they are happy to extend funds to your business, then you will not need to apply for the government support but you will be able to access the bank’s own funds on their terms.
If you are in a situation where the bank is uncomfortable extending its funds to you, then the government guarantee could work well for you and the bank.
The message at this stage; be ready to access the funds you need and be aware that government support is available if other funding sources refuse to supply you with more credit.
Talk to your trusted advisers about how to predict and plan your funding requirements to see your business through what could be difficult times.
The policies around these loans are forever evolving, hopefully this general guidance will point you in the right direction.
Please get in touch if you need advice and support. We really want to help, and we won’t place you under any obligation to use our services.
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