The Bionic guide to business finance during coronavirus

Updated February 22, 2022

The UK government has announced that all Covid restrictions will end in England on Thursday, February 24, and free mass testing will stop from April 1. Most government-backed financial support packages have already ended, but the Recovery Loan Scheme will run until June 30. 

The coronavirus pandemic caused financial problems for businesses of all sizes, in all industries. While some business owners were able to adapt their operations to the changing conditions, others had to close their doors completely, possibly even permanently. 

To help alleviate some of the financial burden placed on business owners, the government announced a series of measures, including loans, grants and tax relief. 

Most of this support came to an end on March 31, when applications for CBILS, CLBILS, Bounce Back Loans and the Future Fund all closed. These loan schemes were replaced by the Recovery Loan Scheme, which has been available since April 6, 2021. For more information, visit the government website.

If you're still in need of some inspiration to help get your business back up and running as government measures are relaxed, check out the Bionic business blueprint for getting out of lockdown. 

Read on to find out more about the financial help available for businesses looking to recover from the coronavirus pandemic and UK lockdowns.

What government help is available for businesses coming out of lockdown?

The government has announced the following package of measures to help businesses adjust to life after lockdown:

• Temporary VAT cut - Any businesses in the hospitality and tourism sector paid a reduced VAT rate - down from 20% to 5% - from July 15, 2020, to September 30, 2021. The rate was then temporarily increased to 12.5%, and will rise back to 20% from March 31, 2022.
• Help to get young people into work - The Kickstart Scheme provided funding to employers to create job placements for 16 to 24-year-olds on Universal Credit. This was designed to help to get unemployed 16 to 24-year-old into work. Applications ended at midday on December 17, 2021

What business loans are available to help business owners through the coronavirus lockdown and pandemic?

The government has introduced a number of business loans during lockdown, to help with cash flow and business finance. 

What is the Recovery Loan Scheme?

The Recovery Loan Scheme was introduced on April 6, 2021, to replace the outgoing Bounce Back Loan, CBILS, and CLBILS schemes. 

Loans or finance packages of up to £10 million are available for all eligible businesses, but the actual amount you'll be offered and the terms of lending are down to the individual lenders. If your application is successful, any money you borrow should be used to help your business recover from the pandemic and assist it through the transition period.

As with other types of state support through the pandemic, the government will guarantee 80% of the finance to the lender. Remember, the loans are provided by private lenders - not the government - and, as the borrower, you are always 100% liable for the debt.

You can find a list of accredited lenders on the British Business Bank’s website.

The scheme is open until June 30, 2022.

Who can apply for the Recovery Loan Scheme?

You can apply for a loan if your business is trading in the UK and it meets the following conditions:

• The coronavirus pandemic had an impact on its ability to operate
• It would be viable were it not for the pandemic
• It's not in collective insolvency proceedings (unless your business is in scope of the Northern Ireland Protocol in which case different eligibility rules may apply)

There's no restriction on turnover, so you can apply regardless of how much money your business makes. 

You can still apply even if you took out loans under the Bounce Back Loan, CBILS, CLBILS, or Future Fund schemes. If you have outstanding debts with any of these schemes, this could affect the amount you can borrow from the Recovery Loan Scheme.

You won't be eligible for finance under the Recovery Loan Scheme under the following circumstances:

• If you are a bank, a building society, an insurer or a reinsurer (this doesn’t include insurance brokers) 
• If you are a public-sector body 
• If you are a state-funded primary or secondary school 

Will a Recovery Loan affect your credit rating?

Personal and business credit ratings won't affect your eligibility, but your lender might register your Recovery Loan with the credit reference agencies. This means a record will be held on your credit file and your credit rating might be affected by any late repayments or failure to pay.

How to apply for a Recovery Loan

Applications are open now, and you should apply directly to the lender via its website. Applications will stay open until June 30, 2022. There is a full list of accredited Recovery Loan Scheme providers, here.

Once you've found a lender, you then need to fill in a short online application form online, to self-certify that your business is eligible for a Recovery Loan.

If your business is eligible, full checks for fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) will be carried out. Some state aid restrictions may apply to your application.

The lender will then make a decision on whether to lend to you. If you're turned down, you can apply to another lender, although remember that multiple applications can have an adverse effect on your credit score. It can be more difficult to get a business loan with a bad credit score, and poor credit history can also affect the type of business energy deal you can get. For more information, check out our guide - Does your business credit score affect your energy deal?

The lender has the authority to decide whether to offer you finance.

And be aware that lenders are not allowed to take any form of personal guarantee or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle) in connection with this loan.

How Bionic can help with your application for a Recovery Loan 

Bionic’s business finance partners at Think Business Loans can help you apply for a Recovery Loan to speed up the application process. 

Our business finance experts will: 

• Carry out a free eligibility check. 
• Help you get your application together to meet lender requirements. 
• Fast track your application (to your own bank or the CBILS providers on our panel). 
• Track the progress of your application through our app. 

This service is subject to Think Business Finance’s terms and conditions, and additional fees do apply. For more information got to 0203 350 1595 

If your application for a Recovery Loan is unsuccessful we'll find you another competitive business loan and we won’t charge an admin fee. 

What coronavirus government grants are available to help with business finance?

The government has announced two main grants that will be available to business owners:

• Coronavirus Job Retention Scheme
• Self-Employed Income Support Scheme

What is the Coronavirus Job Retention Scheme?

Please note - This scheme ended on September 30, 2021. 

The Coronavirus Job Retention Scheme is a grant for employers who can't cover staff wages due to COVID-19. It's designed to make sure as many people as possible can be kept on the payroll and help avoid mass redundancies.

To claim a grant of up to 80% of each employee's wage, up to a maximum of £2,500 per month, you'll need to make sure employees are classified as furloughed workers for at least three weeks, which means they stay on your payroll but can’t do any work for you during this time.

If you're the director of a business and you pay yourself a salary through PAYE, you'll also be able to claim this benefit, so long as you classify yourself as a furloughed worker and don't do any work while claiming this benefit.

Grants will be available by the end of April, payments will be backdated to March and the scheme will last for at least three months.

How to apply for the Coronavirus Job Retention Scheme

Please note - This scheme ended on September 30, 2021. 

The government is setting up an online claims service, but it’s not expected to be up and running until the end of April.

In the meantime, make sure you have the following information available for when you make your claim:

• Your contact name and phone number.
• Your business bank account number and sort code.
• Your ePAYE reference number.
• The number of employees being furloughed.
• The start and end date of the period you’re claiming for.
• The total amount you’ll be claiming.

What if you freelance on short-term PAYE contracts?

Freelancers and contractors who are employed through short-term PAYE contracts won’t be eligible for the scheme. This is because the temporary nature of your contract means it's unlikely you’ll qualify for either the Coronavirus Job Retention Scheme and the fact you’re paid via PAYE or the Self-Employed Income Support Scheme.

If you’re in this position, the only help currently in place is through advanced Universal Credit payments and housing allowance.

What if you’re a ‘gig-economy’ worker or on a zero-hours contract?

The Coronavirus Job Retention Scheme doesn’t appear to offer support to ‘gig economy’ workers or anyone on ‘zero hours’ contracts. Again, the only assistance available is through accelerated Universal Credit payments and support allowance (ESA) claimants.

What is the Self-Employed Income Support Scheme?

Please note - This scheme ended on September 30, 2021. 

The Self-Employed Income Support Scheme is a grant to cover 80% of the average income of self-employed people affected by the coronavirus, up to a maximum of £2,500 per month, for at least three months.

Other conditions are that support is only open to business owners with an income of £50,000 or less, who make most of their income from self-employment, and the benefit will be based upon up to three years' worth of tax returns, but at least one year is needed. This means that if you started your business after April 5, 2020, you won’t be eligible.

How to apply for the Self-Employed Income Support Scheme?

If you’re eligible for the scheme HMRC will be in touch with details of how to apply online. Applications aren’t open yet, and the scheme won't be up and running until June, so don’t contact HMRC for details of how to apply.

All applications will be done through the official GOV.UK website, so be on the lookout for scammers who might direct you to other, similar-looking websites or who ask for bank or credit card details.

If you’re struggling financially, you should apply for Universal Credit and housing allowance as soon as possible, and consider other financing options including payment breaks, mortgage holidays and the Coronavirus Business Interruption Loans Scheme.

What if you’re a business owner who takes payments via dividends?

Although it was originally thought that business owners who pay themselves via dividends would be eligible to apply, this is no longer the case, as dividends aren't regarded as taxable income.

If you pay yourself a nominal salary and top up your wage with dividends, you should be eligible to claim back 80% of the wage you pay yourself through PAYE, but not any money you earn through dividends.

What other coronavirus government grants and benefits are available to business owners?

The government also made the following financial support available to business owners. Please note, all of these schemes are now closed. 

Cash grant for retail, hospitality and leisure

If your business is in the retail, hospitality or leisure sector, with a property that has a rateable value of over £15,000 and less than £51,000 you could be eligible for a cash grant of up to £25,000 per property. If your property has a rateable value of £15,000 or less, you may be eligible for a grant of £10,000. 

• How to apply for a cash grant for retail, hospitality and leisure - you shouldn’t have to apply as payments should automatically be issued by your local authority. If you’re worried you might miss out, get in touch with your local authority -  you can find the contact details for your local authority at https://www.gov.uk/find-local-council.

Small business grant funding

If your business is eligible for small business rate relief (SBRR) or rural rate relief (RRR), meaning it pays little or no business rates, your local authority will be able to provide you with a one-off grant of £10,000 to help with ongoing business costs.

• How to apply for small business grant funding - you shouldn’t have to apply as payments should automatically be issued by your local authority. If you’re worried you might miss out, get in touch with your local authority -  you can find the contact details for your local authority at https://www.gov.uk/find-local-council.

Statutory sick pay rebate scheme

Small businesses can reclaim up to two weeks’ worth of Statutory Sick Pay (SSP) to cover the costs of any absences due to COVID-19. This refund is based on business size and will only be available to any businesses that employed fewer than 250 people on February 28, 2020. 

• How to apply for the statutory sick pay rebate scheme - The rebate scheme isn’t up and running yet, so keep a record of staff absences due to COVID-19, for when it goes live. And remember that employees don’t need to provide a note from their GP if they’re off due to COVID-19.

COVID-19 corporate financing facility 

Designed for large businesses, this scheme will see the Bank of England will buy short-term debt from larger companies, to help support them with cash flow and short term funding. It will be available for financially strong companies affected by the coronavirus crisis, and will run for at least 12 months.

• How to apply for COVID-19 corporate financing facility - You need to speak directly to your bank about applying for this facility.

Business tax support through Time to Pay

If your business is having trouble paying any tax it owes because of coronavirus. If you are self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

• How to apply for business tax support through Time to Pay - Call the HMRC COVID-19 helpline on 0800 0159 559 to talk about Time to Pay support.

VAT deferral scheme

The government has also announced a VAT deferral scheme, which means no business will pay VAT between March 20, 2020 and June 30, 2020. Suspended for the next quarter.

• How to apply for the VAT deferral scheme - to find out how to defer VAT payments, go to https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19

What personal finance help was available for people affected by coronavirus?

If your business finances have been affected by coronavirus, it’s likely your personal finances will also be under some strain. If this is the case, support and help is available.

If you think you’re going to miss payments on any loans, credit cards, store cards or even your mortgage, you need to speak to whoever you owe money to before the problem gets any worse.

If you’re struggling to meet credit card, store card, catalogue or loan repayments, the Financial Conduct Authority (FCA) has ordered banks to allow payment freezes - this means you won’t have to make the minimum repayments for a set amount of time. Although your credit score won’t be affected, interest will still be charged on any debts, so only take a pay break if you really need to.

If your overdraft is causing an issue, the FCA has told banks they must make the first £500 interest-free, but you will be charged the usual rate of interest on anything you owe over that limit.

If you can’t keep up with mortgage repayments, lenders are offering repayment holidays of up to three months. This also includes buy-to-let mortgages, so speak to your landlord about this if you live in rented accommodation and are struggling to keep up with your rent. 

The government has announced emergency legislation to suspend new evictions from social or private rented accommodation during the coronavirus crisis.

Although there doesn’t appear to be any help for council tax payments, even though they’re considered a priority debt, meaning missed payments can land you in serious financial trouble, you might be able to get some help towards paying your Council Tax if you’re on a low income or claiming Universal Credit.

If you’re struggling to pay your energy bills, suppliers have agreed that no credit or prepayment meters will be cut off during this time, but you should speak to your supplier as soon as possible. For more information, check out Energy help during the coronavirus crisis.

UK water companies have also put provisions in place for anyone struggling to pay their bills, so contact your local supplier.

If you’re worried about any type of debt, whether business finance or personal finance, it’s worth getting free, impartial advice from organisations like The Money Advice Service or Stepchange.

What is the small business Bounce Back loan scheme? 

Please note - Applications closed on March 31, 2021, and the scheme was replaced by the Recovery Loan Scheme from April 6, 2021. 

Designed to offer financial help to small business owners who might otherwise be struggling to access credit during the coronavirus lockdown, the Bounce Back Loan scheme offered 100% government guaranteed loans on borrowing between £2,000 and £50,000. 

Bounce Back Loans offered repayment periods of up to six years, with no repayments in the first 12 months. No viability check were necessary and the government agreed to take on 100% of the default risk.

To make sure repayments were 'manageable', loans were available for up to 25% of a small business's annual turnover, up to a maximum of £50,000. The government agreed to pay the interest for the first 12 months. 

What is the Coronavirus Business Interruption Loan Scheme (CBILS)? 

Please note - Applications closed on March 31, 2021, and the scheme was replaced by the Recovery Loan Scheme from April 6, 2021. 

Designed to offer financial support for SMEs with an annual turnover of £45m or less, CBILS provided access to loans, overdrafts, invoice finance and asset finance via government-backed funding. 

Although the loans are government-backed, it’s the banks and other lenders that provided the cash and set the lending conditions. Borrowers are 100% liable for the debt.

What is the Coronavirus Large Business Interruption Loan Scheme (CLBILS)? 

Please note - Applications closed on March 31, 2021, and the scheme was replaced by the Recovery Loan Scheme from April 6, 2021. 

Introduced to help larger businesses who are ineligible for a CBILS loan, CLBILS offered mid-sized and larger UK businesses the chance to apply for finance of between £50 million and £200 million. 

Invoice finance and asset finance (up to a maximum of £50 million) were among the CLBILS finance options, while term loans and revolving credit facilities over £50m will be offered by CLBILS lenders which have secured additional accreditation.