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Coronavirus and your sole trader business

Published on 14th April 2020

The coronavirus affects not just people, but every business in the land - from large corporations - to sole traders. Every one of them could suffer from a lack of income. Larger businesses may have reserves of cash to call on - but what can you do about the financial effects if you are a sole trader?

The coronavirus is unprecedented. Across the UK, businesses have been forced to close, lockdowns are in place, and we are living under stricter rules ever seen since the end of the second world war. It is a frightening time for everyone – but particularly if you have a small business to run.

Your business may lose revenue for several reasons. Even if you are not forced to close, customers might not come in. You could lose access to suppliers. In some cases, you may even be denied access to your business by a police or council edict.

Government Financial Support for Sole Traders

The Government is releasing the details behind their support packages on an almost daily basis. They have already committed £350bn - and they may be prepared to commit more.

Some is earmarked for large businesses but some, at least, is designed to support SMEs - and if you are a sole trader, that means you could benefit. 

There are several aspects to the schemes:

Self-Employment income support scheme

This scheme is equivalent to the PAYE furlough scheme but for sole traders/partners. To qualify you must have:

  • Self-employed profits of less than £50,000
  • Submitted an income tax self-assessment in 2018-19
  • Traded in 2019-20
  • Been impacted by COVID-19
  • Intention to trade in 2020-21

If you qualify, you’re eligible for a taxable grant of up to 80% of your average profits from the last three years, dating back to 2016-17.

The amount will be capped at a maximum of £2,500 per month for three months and paid in one payment directly to your business bank account.

So for example:

  • Average taxable profits of £40,000 per annum at 80% = £32,000
  • Equates to a monthly sum of £2,667 capped to £2,500
  • This amount will be added to your Sole Trader income from the rest of the year and taxed as normal

HMRC will contact you directly if you are eligible and invite you by post. Beware - they will not text, call or email, and if you receive any communications in that way you should expect them to be a scam.

If you have not filed your 2018-19 self-assessment, you can do so up to the 23rd April 2020 without incurring late filing penalties.

VAT deferment

VAT is a big drain on your cash flow that occurs four times a year. The government recognises this and has arranged a VAT concession. VAT-registered businesses with a quarterly balance due between 20th March and 30th June can defer until 31 March 2021.  

This is the equivalent of a 12-month interest-free loan from HMRC. But remember - if you pay VAT by Direct Debit, you MUST cancel it before payment is due to take advantage of the scheme.

Income Tax instalments due 31st July 2020

If you pay by instalments, HMRC has offered to waive the second instalment due 31st July 2020 to 31st January 2021. You do not need to notify HMRC, they will assume you won’t pay.

Mortgage deferment

This is available for up to three months to anyone not in arrears. Apply to your mortgage provider online. Remember, this can cover your commercial mortgage as well as your homeowners mortgage - you can defer paying off your business premises as well as your home if business is slow. Remember that your interest will continue to accrue.

Business Grants

This is available to Retail, Hospitality or Leisure businesses using a property for business, e.g. shops, gyms or pubs registered as rateable by the local authority. Rateable values of £15,000 to £50,999 could receive a grant up to £25,000; less than £15,000 up to £10,000. There’s no application and your Local Authority will be in contact if eligible.

Business Rates Relief

Again, this is available to Retail, Hospitality, Leisure or Nursery businesses. You will not have to pay rates until 1st April 2021.  There’s no application and your Local Authority will be in contact if eligible.

Contact us today about your needs. Our experts can help you identify the most appropriate types of business funding, and find the lenders who are able to offer them at the most cost-effective rates

Government-guaranteed loan scheme

Coronavirus Business Interruption Loans (CBILS) of up to £5m will be 80% guaranteed by the Government with a 12-month interest and capital repayment-free period. The loans will be provided through regular high street banks. The application process is online but is taking a long time.

Interest rates after 12 months are variable and you may have to give Personal Guarantees for loans over £250,000. The order of guarantee call-off, should you default, is 1st personal guarantee; 2nd government; 3rd bank. This loan may not be the best choice if you have other sources of finance.

Loan capital repayment holiday

Where you, or your business, already has fixed-term debt it may be possible to arrange a repayment holiday. Halifax and Santander are two examples of banks offering this scheme.

Borrowing the money you need

The government’s funding schemes are unprecedented and could provide a lifeline to many businesses. But you may find that they cannot provide all the funding you need. Fortunately, there are commercial lending solutions which can help. 

Of course, in the current emergency situation, some lenders are reconsidering their positions - and some have even withdrawn from the market. At Rangewell, we know the lenders who are still ready to help with your funding needs. 

Some of the key types of lending that may be important in the next few weeks and months include:

Cashflow support funding

Cashflow support lending usually takes the form of a short-term Unsecured Loan. You can usually borrow from £1,000-£500,000 – or up to £5m through the Coronavirus Business Interruption Loan Scheme (CBILS).

Revolving Credit Facilities

Revolving Credit Facilities – also known as Overdraft Replacement - allow you to borrow and repay funds as required. They can increase your financial resources, giving you access to cash as you need it, and with no changes when you do not draw down funds. 

Asset Refinance and Commercial remortgages

Where your business owns solid assets, from tooling to kitchen equipment, you may be able to use Asset Refinance to raise finance against them. These facilities can work as a loan, or as a sale and leaseback. You release the investment you have made in the asset to use again – and they can provide a particularly cost-effective solution for your financial needs.

Commercial remortgages can be used in a similar way to raise capital secured on your business premises. Very large sums can be available.

Invoice Finance

When business is slow, getting paid fast becomes all the more important. Invoice Finance provides an immediate cash payment by the lender when you invoice a customer or client for work done, no matter how long it takes for them to pay.

It could help you accelerate cash flow. 

Getting professional help with your finance needs

As a sole trader, you probably can’t call on the same level of financial expertise as larger concerns which is why you need to call on Rangewell.

At Rangewell, we help secure all types of funding for all types of business – and during the current crisis, we can provide the quickest way to find the funding you need.

We can discuss grants, the government funding schemes - and all the commercial finance that can be made available - including those that are available under CBILS.

How Rangewell can help

Banks should have more clarity after all the details of the Government's business rescue package were published – but your business may not be able to afford to wait. You may need help now.

At Rangewell, we are experts in all types of funding for business, and we can help you find the funding you need now. We understand that it can be vital to act quickly if you are to keep your business afloat in these challenging times. 

If you have a cash flow problem caused by the coronavirus or any other urgent funding need, call us, and our experts will work with you to find the solutions you need. We have the expertise you need, and we understand the pressures you are under – and our service is absolutely free.

Call us at Rangewell on 020 3637 4150 - or email [email protected].


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