There are lots of questions about how you can access funding right now. In summary, our advice is:
Make the most of government support measures and HMRC deferments first;
If you want to borrow less than £50,000, consider applying for a Bounce Back Loan first.
Speak to your bank about overdraft facilities and a Coronavirus Business Interruption Loan Scheme (CBILS) application – but be prepared for some very detailed information you’ll need to provide. It’s not a fast process.
Apply for alternative finance as a back-up and/or if you need cash faster.
Let’s look at each of these points in more detail:
HMRC should be your first port of call. Consider deferring any upcoming tax payments.
You can call HMRC to arrange a payment plan. You can follow the steps in our guide on how to do this. Every situation is different and what HMRC agrees for you will depend on your current situation and your history with them. There are no rules to go by.
Make use of the Job Support Scheme and look at reducing hours for members of your team who are under-utilised and cannot be redeployed elsewhere.
Bounce Back Loans
If you need to borrow £50,000 or less, the government’s Bounce Back Loan scheme could help. There’s no interest or any repayments at all in the first 12 months. The application process should be easier than the other options, and you should get your cash faster. The government guarantees 100% of the loan.
You cannot apply if you’re already claiming under the CBILS. If you’ve already received a loan of up to £50,000 under the CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender. For a list of participating banks and links to start your application, click here.
The deadline to apply for Bounce Back Loans or CBILS is 31st March 2021.
Speaking to your bank
An overdraft can be the most convenient source of finance at the moment for many businesses. Your bank could give you access to or extend an overdraft facility. Lloyds bank has offered a fee-free, interest-free overdraft for 12 months to one business we know of. An overdraft could be a flexible, quick and easy way to provide you with a cash flow buffer over the coming months.
Apply for the CBILS.This is the government’s mechanism for helping small businesses access lending. It’s a new version of an old scheme, and the banks are struggling to cope with the demand.
While the government is backing 80% of the loan, the banks are figuring out how to underwrite the remaining 20%. Banks seem to not be asking for personal guarantees for loans up to £250k, with guarantees asked for 20% of loans above that level.
The banks have a long list of requirements to make an application. This checklist will help, as will this guide for Xero users on how to prepare a simple cash flow forecast. Please be prepared to jump through many hoops and to expect up to five weeks turnaround on loans. If you need the cash to make this month’s payroll, you may need a backup plan.
This is the next option and may help you get cash faster. Some alternative finance providers, such as Funding Options, are offering access to CBILS loans – albeit at higher interest rates.
There are many different lenders for different requirements. For example, Market Invoice is offering a lending service to effectively give you an advance on furlough payments if you need cash, fast. Be prepared to pay higher interest rates. However, you should be able to get cash sooner and may be able to borrow a smaller amount to get you through in the short-term. You can go to a platform such as Swoop to apply for alternative finance – both CBILS loans and other options.
How much should I borrow?
There is no right answer to how much cash you should borrow. If you are unsure, please speak to us, we can help you forecast and guide your decision making. As a starting point, aim to only make one application (you don’t want to keep going back). This may mean borrowing more that you may feel you need right now.
With no early repayment charges on loans and many CBILS loans, there’s a strong argument to get the cash you may need now and repay the loan after the crisis is over if you didn’t need the cash after all.
How Wow can help
Get the information together for your applications
Forecasting – both for your own planning and for the loan application
Dashboard – put together the key metrics you should be following into a dashboard to keep you on track