The furlough scheme and your business

The coronavirus crisis has meant that many people who are fit and ready to work have no work to do - because their employers are either forced to shut down - or facing a lack of business to do.

Rather than laying off workers who will be desperately needed in the recovery, many employers are taking advantage of the Coronavirus Job Retention Scheme (CJRS). This means that if you cannot maintain your current workforce because your business operations have been affected by Coronavirus (COVID-19), you can furlough employees and apply for a grant that covers 80% of their usual monthly wage costs.

You can claim for up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions on that subsidised furlough pay.

The scheme was set to be a temporary measure, designed to help employers retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme which was put in place for 4 months starting from 1 March 2020 until the end of July. 

News that the Coronavirus Job Retention Scheme has been extended into the autumn by Chancellor Rishi Sunak, providing continued assistance to struggling UK businesses has been welcomed - but you need to understand the changes involved.

From August, employers currently using the scheme will have more flexibility to bring their furloughed employees back to work part-time whilst still receiving support from the scheme.

This will run for three months from August through to the end of October. Employers will be asked to pay a percentage towards the salaries of their furloughed staff. The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month. 

The extension of the scheme is undoubtedly a huge relief for a great many business owners and their employees, as an immediate turning off of the tap would likely have been disastrous. 

What happens next

CJRS will continue to provide businesses with 80% of employee salaries, capped at £2,500 per employee, until the end of October. But the high cost of the scheme will mean that the government’s generosity cannot go on forever. Since its March creation, the furlough scheme has supported 7.5m workers from nearly one million UK businesses, according to HMRC, and around £10.1bn has been claimed through CJRS.

These figures mean that, at the end of October, businesses will need to contribute to the salaries of furloughed employees.

While employees will be able to return to part-time work from August, many SMEs will struggle to pay full-time salaries due to lower sales volumes. Some sectors such as hospitality, leisure and travel industries may be particularly badly hit.

You may need to start planning how you will deal with your wages bill now.

Getting the help you need

The problem you face is that your business may not have fully recovered by the time you are called on to deal with the full cost of your staff. You will probably not want to let them go - not only will this create resentment and reflect badly on your and your business, but it will also mean that you will lack the skills and human resources to seize the opportunities of the recovery period.

You need to find ways to provide the extra funding your business needs now - before your need becomes acute. At Rangewell, we have a number of solutions which could bring you the extra cash you may need.

The government’s funding schemes are unprecedented and could provide a lifeline - but they can be unwieldy and slow - and in some cases expensive. Fortunately, there are still the usual commercial lending solutions which can help, and with interest rates currently low, it could be a very good time to borrow - because, with many lenders, borrowing has never been so cheap.

Cashflow support funding

A cashflow support loan can provide a reserve of cash to tide a business over a spell when income is reduced - as it is for most enterprises in the current market, and is likely to be during the recovery phase. These usually take the form of a short-term unsecured loan which could be arranged very quickly - and, in the current climate, with competitive rates.

Revolving Credit Facilities

Revolving Credit Facilities - also known as Overdraft Replacement - allow you to borrow and repay funds as required. They can be a simple way to increase your financial resources, giving you the cash you need while you need it, and with no changes when you do not draw down funds. If you believe that your recovery could be swift, they could provide a simple way to provide additional funding for wages shortfalls as required.

Our experts can help you identify the most appropriate solutions for your business - and help arrange the funding you need at the most competitive rates. Contact us today.

Invoice Finance

If your business deals with other businesses, the delays in getting paid will be a handicap for your recovery, and 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 and keep pace with the level of business you actually do.

Merchant Cash Advance

if you do retail business, you many able to raise cash with a Merchant Cash Advance - which allows you to take advantage of the fact that most customers will pay with a card when they buy from you.

Merchant Cash Advance, or Business Cash Advance (MCA/BCA), provides cash advances using your credit card takings as security - and as the means of repayment. 

So your advance is paid back as your customers make card payments, with a proportion of every payment you take diverted to the lender. This means that you don’t need to make any repayments yourself. The level of repayments keep pace with the volume of business you are actually doing, so the more business you do and the more you take via cards, the faster the advance is paid off

Asset Refinance

Where your business owns solid assets, from tooling to kitchen equipment, you could use Asset Refinance to raise finance against them. These facilities can work much like 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. As security is offered, you can expect a lower rate than those offered through an unsecured loan. The finance company will buy the assets from you, providing you with a cash sum. You then buy your assets back with a new finance arrangement. Costs can be lower than ordinary loans because the cash advanced is secured on your equipment.

Commercial Mortgages can be used in a similar way to Asset Refinance to raise capital, although in this case, the asset is your business premises. Very large sums can be available - often up to 70% of the market value of your premises. Commercial mortgages can take around 8 weeks to complete, and may not be ideal where funds are needed urgently. An alternative is a Bridging Loan which can be used to provide finance - although costs will be higher.

Refinancing

If you already raised finance for your business through lending, you may find that repayments on those loans are adding to your cashflow burdens. If the income that you were expecting is not coming in, monthly repayments can be a major drain. You may be able to approach your lenders and discuss the possibilities of a repayment holiday - basically extending your loan term and not making the usual repayments for a month or two until your business is back on its feet.

At Rangewell, we know the lenders who may be most receptive to this idea and we can help you approach them to see if it is possible in your cases.

However if your current finance is with a lender who will not look sympathetically at your request for a payment holiday, it may be possible to refinance your arrangements.

We can help you find another lender who can pay off your existing commitment, you may be able to agree on a loan that offers an initial repayment holiday, a larger loan sum, a lower interest rate or longer to repay. You probably already have a range of loans and funding agreements in place. Refinancing means replacing these agreements with loans that offer lower rates or longer terms which could cut your monthly commitments, especially with the recent cut in bank rates.

Getting the help you need now

At Rangewell, we understand the challenges your business faces as we come out of lockdown - and we know that the best time to start looking at the answers is now. 

Of course, some lenders have, themselves, shut down with the Coronavirus crisis - but we know those who can be in the best position to provide you with funding now - to ensure that you can prepare for the next few months as quickly as possible.

At Rangewell, we are acknowledged experts in all types of business finance. We can help you find the most appropriate and most affordable funding for you and your business, whether you're looking for help with a government scheme, looking at new lending - or in need of fresh ways to cut the costs of lending you already have arranged. 

Call us today for the help you need.