A Bionic guide to business finance during coronavirus

Updated March 3, 2021 

The UK government's roadmap out of lockdown is well underway and, all being well, we could be back to normal by June this year.

Even so, the coronavirus pandemic is causing disruption right across the UK and affecting the business finances of companies of all sizes, in all industries. While some business owners have been able to adapt their operations to the changing conditions, others have 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 will come to an end on March 31 when applications for CBILS, CLBILS, Bounce Back Loans and the Future Fund will all close. These loan schemes will be replaced by the Recovery Loan Scheme, which will be available from April 6, 2021. For more information, visit the government website.

If you're looking towards getting your business back up and running as government measures are relaxed, check out the Bionic business blueprint for getting out of lockdown

And here’s everything you need to know on the financial help available for businesses during the coronavirus pandemic and UK lock down.

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 will pay a reduced VAT rate - down from 20% to 5%.
  • Help to get young people into work - The Kickstart Scheme provides funding to employers to create job placements for 16 to 24 year olds on Universal Credit. This is designed to help to get unemployed 16 to 24-year-old into work.

As more information becomes available, we'll update this page with details of which businesses are eligible and how to apply.

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 small business Bounce Back loan scheme?

Please note - Applications will close on March 31, 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 offers 100% government guaranteed loans on borrowing between £2,000 and £50,000.

Bounce Back Loans can be taken out for up to six years, with no repayments in the first 12 months and the government is working with lenders to agree a low rate of interest on these loans.

Applications can be made directly to the scheme's accredited lenders through a simple form that will include a full fraud check.

Crucially, it appears that there will be no viability check and the government has agreed to take on 100% of the default risk, which means there is no risk to the provider and arguably the biggest barrier to lending has been removed.

To ensure repayments are 'manageable', loans are available for up to 25% of a small business's annual turnover, up to a max of £50,000, and the government will also pay the interest for the first 12 months.

Who can apply for a Bounce Back Loan?

To be eligible for a Bounce Back Loan, your business must be:You can apply for a loan if your business has been impcted by the coronavirus pandemic and:

  • is based in the UK
  • has been negatively affected by coronavirus..
  • wasn't classed as an ‘undertaking in difficulty’ on December 31, 2019 (if it was, you must confirm your business complies with additional state aid restrictions under de minimis state aid rules).
  • was an established business by March 1, 2020 and is engaged in trading or commercial activity
  • is not in bankruptcy, liquidation or going through a debt restructuring programme
  • gets more than 50% of its income from its trading activity.

You won't be able to apply for a Bounce Back Loan if your business is:

  • a bank, insurer or reinsurer (not including insurance brokers).
  • a public sector body.
  • a grant-funded further-education establishment.
  • a state-funded primary or secondary school.
  • already claiming funding.

If you're currently applying for a loan under the Coronavirus Business Interruption Loan Scheme (CBILS) you can't apply for a Bounce Back Loan. 

But if you receive CBILS funding of no more than £50,000, you can transfer it into the Bounce Back Loan scheme. You'll need to arrange this with your lender and have until January 31, 2021 to do so.

Will a Bounce Back Loan affect your credit rating?

Personal and business credit ratings won't affect your eligibility, but your lender might register your Bounce Back 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 Bounce Back Loan

Applications are open now, and you should apply directly to the lender via its website. There is a full list of accreddited Bounce Back Loan 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 Bounce Back 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 there is no word on what impact this could have on your credit score).

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.

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

Please note - Applications will close on March 31, 2021. The Recovery Loan Scheme will replace it as of April 6, 2021.

Designed to offer financial support for SMEs with an annual turnover of £45m or less, CBILS provides 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 provide the cash and set the lending conditions, which has seen a number of small businesses struggle to meet the eligibility criteria.

The scheme has since been extended to all viable small businesses affected by Covid-19, which means more businesses should be able to get funding.

To find out who the accredited lenders are, and to see if your bank is among them, they’re all listed on the British Business Bank website.

Before you apply, it’s worth making sure you at least meet the conditions set out below.

  • The loan application must only be for business purposes.
  • Your business  must have been trading for at least two years.
  • You must be able to show maintainable turnover during the current crisis.
  • Neither you or your business can have any adverse credit or CCJs.
  • Your business must be a UK-based SME with annual turnover of up to £45 million.
  • Your business  must generate more than 50% of its turnover from trading activity.
  • Your CBILS-backed facility will be used to support primarily trading in the UK.
  • You wish to borrow up to a maximum of £5m. (Finance terms are to six years for term loans and asset finance. For overdrafts and invoice finance facilities, terms will be up to three years).

If you run a larger business, with an annual turnover of between £45m and £500m, the government has launched the Coronavirus Large Business Interruption Loan Scheme (CLBILS), which will make loans of up to £25m available. For more information, check out the CLBILS page at the government’s Business Support website.

How to apply for the Coronavirus Business Interruption Loan Scheme (CBILS)

To apply, go to the accredited lenders and partners page on the British Business Bank website, to find a suitable lender. If your own bank is involved in CBILS, you should apply to them first and only apply to other lenders if your bank isn't on the list.

Once you’ve decided on a lender, you should apply directly to them, preferably via their website to ease the pressure on call centres. The deadline for applications is Monday, November 30, 2020.

It’s worth remembering that the government isn’t actually providing these loans, which means it’s the individual lender who’ll decide whether your application is successful. 

The government’s CBILS guarantee covers the lender and not your business, which means you’re 100% liable for repayment of the facility supported by CBILS and any late-payments or non-payments will be noted on your business’ credit file.

And if lenders can offer finance without using the scheme, then you might be offered a standard business loan or overdraft instead.

How Bionic can help with your application for the government’s Coronavirus Business Interruption Loan Scheme (CBILS)

Bionic’s business finance partners at Think Business Finance can help you apply for a CBILS 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 Finanace’s terms and conditions, and additional fees do apply. For more information got to 0203 350 1595

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

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

Please note - Applications will close on March 31, 2021. The Recovery Loan Scheme will replace it as of April 6, 2021.

Introduced to help larger businesses who are ineligible for a CBILS loan, CLBILS offers 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) are 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. 

To apply for CLBILS, your business must meet the following conditions:

  • Be based in the UK.
  • Have an annual turnover of over £45 million.
  • Has not received support under the Bank of England’s COVID-19 Corporate Financing Facility (CCFF).

And when applying, you'll also need to show that:

  • Your business would be viable were it not for the pandemic.
  • Your business has been affected by coronavirus.
  • The loan will enable you to trade out of any short-term to medium-term difficulty resulting from coronavirus.

The deadline for applications is Monday, November 30, 2020. To apply, visit the CLBILS page on the British Business Bank website.

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 will end 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 has now been extended and will remain in place until December 2020.

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 contracts mean 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 will end 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 look out 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 has also announced that the following financial support will be available to business owners:

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.

What personal finance help is 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.