Covid-19: A guide to the support available to your business

23 Apr 2020

The UK government has this week launched a loan program for mid-sized and large companies as part of its £330 billion coronavirus financial support package.

To help you understand what aid is available to your business, Investec experts summarise all the measures and outline practical steps - from foreign exchange to working capital to cash management - that can help increase resilience in this turbulent time.

 
 
 

 

Support for large businesses

From this week, companies are now able to apply for the Coronavirus Large Business Interruption Loan Scheme (CLBILS). Specifically, the new scheme provides funding to mid-sized and large UK businesses with turnover above £45m – the upper cap for the existing smaller-business focused Coronavirus Business Interruption Loan Scheme scheme (CBILS).
 
Under the scheme, a qualifying business can access up to £50m of financing if turnover is over £250m and £25m if turnover is less than £250m. All facilities are supported with a government-backed partial guarantee for the loan repayments, interest and fees. The initiative aims to encourage greater lending and financial support to UK businesses that have seen their income and cash flow disrupted by the crisis.
 
This additional measure follows a range of significant announcements to support businesses through this unprecedented period – a summary is provided below. To expedite access to this support, the government has decided to channel these measures through 40 accredited lenders, including all the major UK banks.
 
The British Business Bank (BBB), which manages the CBILS and CLBILS schemes, is accepting applications for new lenders to join and Investec has applied to become an accredited financial institution. However, in the interim, if you require funding under the programmes, you should contact your relationship bank.

What other support measures has the government announced?

Below is a summary of the other key measures announced by the government in recent weeks to help support businesses and the economy in response to the growing threat coming from the coronavirus outbreak.

  • The Coronavirus Job Retention Scheme: A government grant for employers to put employees on furlough, rather than lay them off. This will be in the shape of an 80% payment of an employee’s salary, up to £2,500 per month. This will be backdated to 1 March and will initially last for at least three months.
  • Deferring Valued Added Tax (VAT) payments: HMRC will suspend quarterly VAT payments until the end of June. Firms will have until the end of the financial year to pay.
  • Statutory Sick Pay (SSP) relief for small and medium-sized enterprises: SMEs and employers can reclaim SSP paid for sickness absence.
  • Business rates holiday: A 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England.
  • Grant funding:
    • Small business grant funding of £10,000 for all businesses in receipt of small business rate relief or rural rate relief.
    • Grant funding of £25,000 for retail, hospitality and leisure businesses with a property of a rateable value between £15,000 and £51,000.

  • The Covid Corporate Financing Facility: The Bank of England will provide support to larger firms by purchasing commercial paper of up to one-year maturity.
  • The HMRC Time To Pay Scheme: All businesses and self-employed people in financial distress and with outstanding tax liabilities may be eligible to receive support for their tax affairs.
  • Insurance confirmation: Businesses that have cover for both pandemics and government-ordered closure should be covered, with the government and insurance industry confirming that advice to avoid pubs, theatres, and restaurants is sufficient to make a claim.
  • Self-Employment Income Support Scheme: This initiative will allow individuals to claim a taxable grant worth 80% of trading profits to a maximum of £2,500 per month. The scheme will be open for three months but may be extended.
  • Coronavirus Bounce Back Loan: This scheme will help SMEs affected by Covid-19 to apply for loans of up to £50,000. The government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. Loan terms will be up to six years and no repayments will be due during the first 12 months.
 
Please check the appropriate government websites for details of the full range of support measures available and information on eligibility and how to access them. Given the rapidly changing nature of the Covid-19 outbreak, information and advice from the government can change quickly. Please check these sites regularly to ensure you have the most up-to-date information:
 

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What practical steps can I take to future-proof my business?

During this period of uncertainty, companies can also consider taking a series of practical steps to unlock flexibility from their foreign exchange, working capital, and cash management solutions to help mitigate the impact on cash flow and supply chains.

Cash flow and working capital

In this turbulent time, businesses face widespread supply chain disruption. A range of factors must be assessed throughout the chain to help ensure business continuity. Availability of stock may drop, and businesses may see fluctuating component costs. This impacts importers as well as exporters. In some cases, companies may see protracted delays in supply lines.
 
In this case, have contingency plans been explored? Can you call upon alternative suppliers or manufacturing centres? How quickly can you adapt your supply chain, and how will this impact the bottom line?
 
If your supply chain is impacted, it is essential to speak with mission-critical suppliers, understand the impact on their businesses and set in motion a contingency plan.
 
New supply chain partners may have different methods of operating, and if you do not have an established relationship, they may seek advance payment or bank guarantees. Businesses should also review contract liabilities and assess any potential impact from cancellations, supply freezes or ongoing delays.
 
If your supply chain is impacted, it is essential to speak with mission-critical suppliers, understand the impact on their businesses and set in motion a contingency plan.

Are there measures to ensure smooth cash flow?

Cash flow is the lifeblood of any business. During this difficult period, we are acutely aware that companies must ensure healthy levels of cash flow to keep supply chains moving. 
 
In volatile conditions, you will want greater certainty that you will get paid if you are the seller and that you will receive what you have ordered if you are the buyer.
 
If your business is experiencing decreased levels of revenue, income or cash flow, the good news is there are measures you can take to ensure business continuity. Financial services providers can help you access a range of solutions to give you greater flexibility in terms of your cash flow and working capital. 
 

What about working capital solutions?

If you are facing potential disruption, a key source of support is the flexibility of your working capital strategy. One key element of a dynamic working capital strategy is cash flow funding via invoice discounting.
 
Through this method of receivable finance, your business can efficiently release cash from unpaid invoices.

This is a far more flexible option than a loan or overdraft and can ensure continuity of day-to-day activities and create sustainable cash flows into the future.

How can I manage cash in uncertain times?

At a time of financial and economic stress, CFOs, treasurers and financial directors must ensure cash and liquidity is managed efficiently across the whole business and its supply chains. This means setting in place a cash management and treasury policy that is aligned with individual company risk tolerance, while ensuring the business is strategically unlocking flexibility and liquidity where possible.
 
There are a number of questions companies should be asking themselves about their cash management strategy amid the current turbulence, including: When was the last time your treasury policy was reviewed? Are you comfortable with the credit ratings and capital position of your banks – should you look at diversifying?

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How can I mitigate FX risk?

The disruption to supply chains has been exacerbated by elevated volatility in currency markets, meaning now is a good time to evaluate your current hedging strategies and look at flexible solutions. For example, shipment delays can mean less clarity over the timing of foreign-exchange payments. Rising costs or loss of income due to currency shifts can impact cash flow and, in turn, cloud business forecasts as companies have less certainty.
 
Firms with hedges in place may also need to assess whether significant disruptions warrant action. For example, as sterling has fallen and supply chains are significantly disrupted, they must consider whether these hedges are still appropriate.
 
Companies should consider their foreign currency requirements. If they are experiencing supply chain disruption, they can seek to better align payments by taking into account adjusted cash flow – and by potentially adding flexibility around timings to mitigate risk around supply chain delays better.

Can I cancel or delay FX trades?

Given the supply chain disruption, some trades will no longer be needed. If you do think you need to re-evaluate your strategy, please talk to your dealer to look at what can be done.

Find out more about how you can manage your exposure to risk during the Covid-19 crisis