It’s been nearly a year since we entered the first lockdown and with that came the first round of financial support initiatives from the Government. Over the last year Chancellor Rishi Sunak has launched various support schemes to help businesses and individuals such as the Job Retention Scheme, SEISS grants, VAT deferrals and Business Grants worth over £280bn.
As we approach the 1-year anniversary, it is important as a business owner that you revisit your cashflow forecasts and align them with any government-backed financial support you have accessed. As it currently stands, the furlough scheme is set to end at the end of April, and applications to business loan schemes close at the end of March along with payments for deferred VAT. The Chancellor’s focus has always been to support businesses and protect jobs and those eligible to such schemes have been able to because their business cashflow has been adversely affected by the pandemic. We are now at the stage where you need to begin factoring in the implications of any support you have accessed and update your cashflow forecasts accordingly.
Over the weekend the chancellor announced further Pay as you Grow flexible repayment options to ease the burden on more than a million businesses that have accessed the Bounce Back Loan Scheme.
The Treasury’s Pay as You Grow repayment flexibilities enable borrowers to tailor their repayment schedule, with the option to extend the length of their loans from six to ten years (reducing monthly repayments by almost half), make interest-only payments for six months or pause repayments for up to six months.
The Chancellor has now extended the flexibility of the third option, which will now be available to all from their first repayment, rather than after six repayments have been made. This will mean that businesses can choose to make no payments on their loans until 18 months after they originally took them out. This will have a positive impact on cashflow.
Lenders will begin reaching out to borrowers to provide information on repayment schedules and how to access flexible repayment options.
The government has made clear that lenders are expected to offer Pay As You Grow options to all borrowers under the Bounce Back Loan Scheme and borrowers should only expect correspondence three months before their first repayments are due.
The Bounce Back Loan Scheme is available to apply for until 31st March 2021, a lot of lenders are dealing with a back log but that isn’t to say you cannot apply providing you act quickly.
The enhanced support announced over the weekend brings the Bounce Back Loan Scheme in line with CBILS where repayment extensions of up 10 years* have already been announced.
*It is important to note, not all CBIL lenders are providing the 10-year extension and you are advised to speak to your lender about this directly.
You can still apply for CBILS up until 31st March 2021, providing you act quickly.
The VAT deferral new payment scheme allowed business to make 11 smaller monthly instalments, interest free, instead of paying the full amount in one lump sum to help with cashflow.
If you deferred VAT between 20 March and 30 June 2020 and still have payments to make you can pay the deferred VAT in full on or before 31 March 2021.
A new version of the scheme has been announced but the ability to opt into this is not yet available. For full details visit the HMRC website.
Based on current information, the furlough scheme is expected to end at the end of April 2021. The ability to furlough employees has significantly helped businesses to manage their cashflow. As the scheme draws to an end, it is vitally important you consider the implications of the support no longer being available on your cashflow moving forward.
Support from the Fabulous Group
Throughout the course of the year, we are proud to have supported many of our clients with their applications for grants and filing of furlough claims at no extra cost. Please contact us for more information in relation to any of the points raised in this article.
If you would like any guidance with regards to cashflow forecasting or access to government-backed support, we are happy to talk through your options with you, simply call 0800 112 0880 or email firstname.lastname@example.org