It has been a tough year for businesses and with Government guidelines continually changing, it is more important than ever that organisations understand the financial help available to them as they navigate through this uncertain period. In this post, we look at what financial support is available to help organisations at risk of insolvency.

It is clear from speaking to business leaders that cashflow has been of high concern and priority throughout the pandemic and, now more than ever, it is important to fully understand where you stand and the financial support available to you if your business is at risk.

The Government announced the bounce-back loan in March which aims to help small and medium-sized businesses borrow between £2,000 and up to 25% of their turnover, with a maximum of £50,000 available. The Government guarantees 100% of the loan meaning there are no fees or interest for the first 12 months, after which the interest rate is 2.5% a year. Another option is the Coronavirus Business Interruption Loan Scheme which allows up to £5 million for SMEs with no interest for the first six months and the Government assures 80% of the finance to the lender as well as pays interest and any fees for the first 12 months. Whereas the Coronavirus Future Fund Scheme provides Government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors. As part of the corporate financing facility, the Bank of England will buy short-term debt from large companies with the scheme operating for at least 12 months, and for as long as steps are needed to relieve cash flow pressures on firms that make a material contribution to the UK economy. Further, the Coronavirus Large Business Interruption Loan Scheme aims to help medium and large sized businesses, with an annual turnover of more than £45 million, to access loans and finance up to £200 million. All of these schemes are accepting applications until 30 November 2020 so now is the time to act.

A potential life support for businesses

In June, the Government announced the Corporate Insolvency and Governance Act 2020, which included temporary provisions to relax the requirements for company meetings until 30 December 2020. Restrictions on statutory demands and winding up petitions have also been extended until 31 December 2020. Companies that are the subject of winding up petitions presented before this date may not need to apply for validation orders in order to make payments or dispositions of company property. The eligibility requirements for the new moratorium procedure have also been extended to 31 March 2021, although there are various other options available to businesses considering the moratorium scheme.

In these uncertain times one thing we can be certain of is that now is the time for business leaders to know what options are available and how much these options cost in the long term. Also, now that the suspension provisions relating to wrongful trading have ended, directors should consider carefully how their businesses are trading.