Your practice, your clients - and coronavirus

Why Accountants need to support clients through the crisis - and how they can do it

SMEs form the backbone of the UK economy - and the coronavirus crisis is threatening to break them.

Whether customers have stopped coming in, supply chains are stalled - or the government emergency measures mean that they need to shut - small businesses, including your SME clients, are facing threats of a level they have never faced before.

At Rangewell, we - like you - are ready to help.

Of course, while the government has declared a virtual lockdown, effectively bringing the world of a business to a halt, they have also promised help with a £330bn rescue package. But in an emergency, accessing that support may take time which your clients do not have.

Right now, your clients are adrift and turning to you for the help they need. 

Some will need you to help them with restructuring their financial arrangements. Some will need to find new sources of funding - and some will want your help to understand just what help the government is making available. 

What exactly is the government doing?

There are several elements to the government rescue package as it currently stands - with new measures promised as the days go by.  

The first is the new Coronavirus Business Interruption Loan Scheme - CBILS. This is aimed at helping small and medium-sized companies keep in business by allowing them to borrow up to £5m at preferential rates through the British Business Bank.

Under CBILS, viable SME businesses - viable meaning that they were trading profitably before the crisis - can apply for a 12-month interest-free loan facility guaranteed by the government. CBILS supports a wide range of business finance products, including Term Loans, overdrafts, Invoice Finance and Asset Finance. The scheme provides the lender with a government-backed guarantee for 80% of the funding, which could potentially persuade a lender to make a positive decision if the applicant is a borderline case. 

CBILS: Key features

• Up to £5m funding on repayment terms of up to six years
• 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance
• No guarantee fee for SMEs to access the scheme: No fee for smaller businesses, lenders will pay a fee to access the scheme
• Interest and fees paid by Government for 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments 
• Finance terms: Finance terms are up to six years for Term Loans and Asset Finance facilities, for overdrafts and Invoice Finance facilities, terms will be up to three years
• Security: The scheme may be used for unsecured lending for facilities of £250,000 and under. Facilities above £250,000 can be arranged using CBILS if no security is available
• The borrower remains 100% liable for the debt.

At the other end of the scale, large companies can take advantage of the Bank of England's new Covid Corporate Financing Facility (CCFF). The Facility will provide funding to businesses ‘making a material contribution to the UK economy’ by purchasing commercial paper of up to one-year maturity.

Under the new Covid-19 Corporate Financing Facility, the Bank of England will buy short-term debt from larger companies.

This will help businesses across a range of sectors to pay wages and suppliers while experiencing severe disruption to cashflows because of the crisis. Businesses do not need to have previously issued commercial paper in order to participate, but must be able to demonstrate they were in sound financial health prior to the shock.

The facility will offer financing on terms comparable to commercial markets in the period before the Covid-19 emergency. The facility will look through temporary impacts on firms’ balance sheets and cash flows by basing eligibility on firms’ credit ratings prior to the Covid-19 shock. 

It is, effectively, a government promise to buy short-term IOUs from companies that are investment grade - those with a very high credit rating.

There are other measures – some still being prepared:

• Freelancers and self-employed clients may be able to have up to 80% of their earnings paid by the government
• All businesses can take advantage of measures like deferring VAT and Income Tax payments, and the Coronavirus Job Retention Scheme, to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during the crisis
• There will be a 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
• There will be small business grant funding of up to  £10,000 for businesses in receipt of small business rate relief or rural rate relief
• There will be grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,001 and £51,000.

How you can help

The new conditions and the support available can be bewildering, and your clients will need your help to access what is available.

But the government’s measures - generous though they are - may not always be enough to help your clients through the crisis. Some will find that they are not eligible for various technical reasons. Others may come to see that the support will not be generous enough.  

You clients will be turning to you as their most trusted advisor to help access the government’s help and to find additional solutions. Not only do you need to understand the details of the government schemes, but you will also need to know all the different types of commercial business funding available, you need to know the lenders who can offer the most competitive rates, and who can provide funding at short notice and in adverse circumstances. 

It can mean real challenges for you, your professional skills and your practice - but fortunately, help is available. At Rangewell, we are specialists in business finance. We help all types of business access all types of funding - and we are establishing ourselves as experts in funding for businesses affected by the corona crisis. 

If your clients come to you with a cash flow or other funding problem caused by the current challenges, call us 020 3637 4150 - or email contact@Rangewell.com. Our experts will work with you to find the solutions that are available and help you secure them. We can discuss CBILS and CCFF, and the various other funding options available - and help you to give your clients the support they need. Plus our service is free.