Covid-19 is causing significant disruption to supply chains, sites, programmes, distribution channels and the workforce for all tiers on a construction site. All of which puts significant pressures on your cashflow.
Over the last month we have seen the Government take unprecedented steps towards supporting the UK economy. News such as the Coronavirus Job Retention Scheme (CJRS) were a welcome relief to many.
However, while all support is welcome, there is an inevitable time lag to receiving such support and that intervening period needs to be funded by you, your business or your bank, until the Government systems are up and running and monies start to flow. The latest estimates from the Government are that companies will start to receive CJRS reimbursement 6 days after application. In the interim will your cash flow support this? Cash flow notoriously is the downfall of a lot of construction industry businesses.
If your business is affected by Covid-19, you might need financial support as soon as possible and there are a range of options open.
Obviously, for non-payers, adjudication is still an option but you must consider carefully if it’s worth the cost given the potential uncertainty of the other parties’ financial health and their possible cashflow problems?
So what support can the banks and the private sector offer?
Unlike the 2008 financial crisis, Covid-19 represents a massive demand-side shock to our economy, and so lenders are still lending.
Most mainstream banks have dedicated support pages and we have provided links to some of these below:
- HSBC – hsbc.co.uk/help/coronavirus/
- Barclays – home.barclays/news/2020/03/supporting-our-customers-and-clients-impacted-by-coronavirus–co/
- Lloyds – lloydsbank.com/business/coronavirus.html
- NatWest – business.natwest.com/business/support-centre/service-status/coronavirus.html
- Santander – santandercb.co.uk/coronavirus
Speak to your bank at the earliest opportunity if you are concerned about the effects of Covid-19 on your business. You should be discussing options such as capital repayment holidays or reductions, overdrafts (new or extended) short term facilities or increased credit limits.
Consider short term facilities – most lenders (not just the mainstream funders listed above) offer overdrafts (new or extended) short term or working capital facilities which could support your business. We work with a great number of such liquidity providers and can work with your business to access such funders. Other options can include asset or invoice finance facilities, business credit cards, merchant cash advances etc.
Whilst you should always start with your existing banks(s) also consider alternative debt providers, who offer different sources of capital. These may take more time to advance but you may need to widen your search as much as possible. We have strong links to many of these institutions and can assist you with introductions and any subsequent capital raises.
How is the Government supporting SMEs and large businesses in the construction field?
Small business grant funding of £10,000 for all businesses in receipt of small business rate relief or rural rate relief – your local authority will write to you if you are eligible for this scheme.
Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000 – your local authority will contact you if you are eligible.
Depending upon the size of your business the following Government guarantee backed schemes are available:
- The recently announced Bounce Back Loans Scheme (BBLS) will enable the smallest pre Covid businesses to make a fast track application for up to £50,000 available over 12 months which will be payable in days by applying on-line to their bank through a short and simple form. This scheme is due to go live on 4th See the British Business Bank (BBB) website below for greater detail.
- The Coronavirus Business Interruption Loan Scheme (CBILS) enables approved banks to offer loans of up to £5m to SMEs that were viable before Covid-19, with a turnover of less than £45m. See BBB website link below for greater detail.
- The Coronavirus Larger Business Interruption Loan Scheme (CLBILS) is a similar scheme for all pre Covid viable larger corporates with a turnover of more than £45m for support of up to £50m. See the BBB website link below for greater detail.
- Government support for significantly larger businesses is available through the Covid Corporate Financing Facility (CCFF) which will provide funding to permitted businesses by purchasing commercial paper (unsecured debt security that has a maturity of less than one year) of up to one-year maturity This is ONLY available to firms making a material contribution to the UK economy. See BBB link below for greater detail.
Other liquidity support being offered:
- Updated guidance on the Coronavirus Job Retention Scheme (CJRS). HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month. HMRC have now set up a system for reimbursement. We are summarising the guidance as it comes through, on our CJRS/ Furlough FAQ page.
- Deferring VAT and Income Tax payments – HMRC will automatically defer VAT payment for three months for all UK businesses.
- Statutory Sick Pay relief package for SMEs – a rebate scheme is being developed. Further details will be provided but, as a result, it will require funding in the interim.
- 12-month business rates holiday for all retail, hospitality and leisure businesses in England – this is administered at council tax level. No applications are necessary.
- HMRC Time To Pay Scheme – our tax team can advise on any such process as needed.
Further detail available at: www.british-business-bank.co.uk
We can help you by:
- Making applications to these government support schemes on your behalf through Finance Generator LINK
- Discussing key steps you should be considering in the immediate, medium and long term around Covid-19
- Advising on how to approach your bank or other funding partner to seek help
- Facilitating introductions to new funding partners
- Helping ensure your future applications for payment and payment notices are robust and contractually compliant giving you the best chance to make a significant recovery when matters return to normal.
All businesses applying for loans should note that, until a loan is approved and funding is forthcoming, you will need to rely on your cash reserves. Do your cashflow forecasts reflect these timescales and do you have the cash reserves to be able to support your forecasts?
Aside from the specifics of the application process, typical information that will be required is set out below. We would recommend you have this to hand (if possible):
- Latest management accounts (not including any element of coronavirus-related trading) to demonstrate the position of the business before the crisis
- Your financial model (minimum of three months going forward) to include the impact of coronavirus
- Balance sheet
- Cashflow (minimum of three months) to reflect the impact of coronavirus. If possible, include a cash flow forecast without the impact of coronavirus and a narrative to accompany the two cashflows to explain the differences and any areas/times of particular concern.