This article is authored by Dave Broadbent, Partner at Begbies Traynor York, and runs through the business finance options available once government support comes to an end. With the Coronavirus Job Retention Scheme (CJRS) closing on the 30 September 2021 and support loan repayments starting, many businesses are yet to bounce back from Covid-19 trading disruption. We explore commercial finance options and restructuring procedures that can aid your recovery.
If your business requires a cash injection to facilitate growth and investment, commercial finance is available in many forms to suit your needs, such as asset finance and invoice finance.
Asset finance can help fund the purchase of business assets, such as industrial machinery and equipment without having to pay an upfront cost. This form of business finance can support the growth of your business and remove your dependency on immediately available cash that may be in short supply.
Invoice finance can bridge the gap in cash flow while you wait for invoices to be paid. By advancing cash tied up in invoices, these funds can be used to maintain the daily running of your business, replenish stock and settle payments as and when they fall due.
There are three types of invoice finance options that provide different levels of control over the sales ledger: invoice factoring, invoice discounting and single/spot invoicing.
Invoice factoring instantly releases cash from invoices and control of the sales ledger will lie with the lender, whereas invoice discounting allows you to retain control over the sales ledger. Single/spot invoicing provides more flexibility as you can handpick invoices you wish to fast forward and retain full control over the collection process. This form of finance can effectively mitigate bad debts and enhance credit control processes.
Refinancing can release working capital by borrowing against the value of existing assets and using them as security. Alternatively, a business loan is a traditional lending option that can help access cash with ease to further your growth plans and meet the growing financial demands of your business, subject to income levels.
Recovery Loan Scheme
The Recovery Loan Scheme was unveiled to provide financial support to businesses as they recover from the effects of the pandemic and is open until 31 December 2021. The government guarantees 80% of the finance to the lender, offered through a network of accredited lenders.
The scheme offers term loans or overdrafts of between £25,001 and £10 million and invoice or asset finance of between £1,000 and £10 million. The maximum length of the facility is up to 3 years for overdrafts and invoice finance facilities, and up to 6 years for loans and asset finance facilities.
Company restructuring and rescue support
If your business requires urgent business debt help as a result of dwindling cash flow and debt build-up, formal company restructuring and rescue routes are available to help businesses protect creditor interests and prevent the business from deteriorating. This is typically conducted by raising funds for creditors through asset sales or negotiating affordable repayment terms with creditors through a Company Voluntary Arrangement (CVA). Under the guidance of a company restructuring and rescue expert, a businesses financial health can be returned to pre-Covid-19 levels.
Time to Pay (TTP)
A TTP is an agreement made with HMRC to spread your tax liabilities into affordable instalments, typically over 12 months. If you are struggling to keep on top of tax payments to HMRC, such as Corporation Tax, VAT or PAYE, a Time to Pay Arrangement (TTP) can help settle outstanding affairs with HMRC to ease company cash flow.
To successfully negotiate a TTP with HMRC, you must propose an affordable repayment plan and take into consideration outgoings. At the onset of the coronavirus pandemic, Time to Pay Arrangements were heavily publicised to prevent the build-up of tax debts and late-payment penalties from HMRC.
Business debts recovery
If your business has a growing debtor book that is biting into cash flow and therefore delaying payments, appointing a professional business debt collection service can help maximise debt recovery. They can review your existing credit control processes to identify underlying problems which can also reduce the likelihood of accumulating bad debt.
The Covid-19 pandemic inevitably pushed many businesses into a state of financial distress, increasing late and non-payments. Taking early action can help raise funds for staff wages and keep your business ticking at a healthy pace.
Where to go for more information…
York & North Yorkshire Growth Hub offer free resources and support to help small businesses and we’d love to help you need further business finance support. Send us a message or give us a call at York & North Yorkshire Growth Hub.