Gary Hemming, director of business loans at financial broker ABC Finance, describes ways a bakery can access financial support
The coronavirus pandemic has caused enormous problems for business owners around the world. Businesses have been hit hard, especially with the shutdown of non-essential businesses.
As more details are released daily, it can be difficult to understand what support is available to you and your staff. In this guide, I will detail the options available through grants and government support, in addition to borrowing opportunities in the commercial financial market.
Government grants and assistance
Small business grants
For businesses that are currently eligible for Small Business Tariff Relief (SBRR), a grant of £ 10,000 will be paid automatically through the local council.
You are not required to apply for this grant, your local authority will contact you in early April with the details, with payment expected shortly thereafter.
If you have any questions about your eligibility for this grant, you should contact your local authority – you can find their contact details on the government website.
Grants for large companies
For businesses with a taxable value between £ 15,000 and £ 51,000 that are classified as retail, you are eligible for a grant of £ 25,000.
Retail businesses are classified into stores, restaurants, cafes, drinking places, cinemas and concert halls.
As with the Small Business Grant, no action is required, you will be contacted by your local authority with more details.
If you cannot wait for the grant, if you are ineligible and need funds, or if you need additional funding, you may be eligible for the Coronavirus Business Interruption Loan Program (CBILS ).
Coronavirus Retention Program
To protect the jobs of workers who would otherwise be made redundant during the crisis, the government launched the Coronavirus Job Retention Scheme. Thanks to this mechanism, the government pays 80% of the salaries of these personnel, initially for three months, even if its extension is not excluded.
Further details must be published, although in order for your staff to be eligible you must classify them as “worker on leave”. The HMRC must then be informed via a portal, which is being designed.
It is up to the employer to pay the additional 20% of the worker’s salary. Once produced, the payroll can be backdated to March 1.
For more information on government support programs, visit business support website.
To borrow money
Business loans can be arranged on a secured or unsecured basis. Unsecured business loans do not require a charge on a property, unlike secured loans.
Unsecured loans can be arranged on the following bases:
- • Borrow from £ 3,000 to £ 500,000 – or up to £ 5million through the Coronavirus Business Interruption Loan Program (CBILS)
- • Terms of 6 to 60 months
- • Completed in 5-7 days
80% of the amounts of loans eligible for CBILS are guaranteed by the government, which means that the lender will be repaid if you fail to repay. In addition, the interest for the first 12 months is paid by the government, and lenders are responsible for judging a business based on its past performance and future viability, with current issues viewed with sympathy.
Secured business loans work as follows:
- • Borrow from £ 26,000 with no loan limit
- • Terms up to 25 years
- • Completed in about 14 days
Secured business loans may benefit from somewhat more flexible criteria, due to the additional security offered by your property.
Revolving credit facilities for businesses
Revolving credit facilities allow you to borrow and repay funds as needed, with no real upper or lower limit on the size of the facility. The most well-known facility is overdraft, although many lenders offer stand-alone facilities managed through online portals.
Certain revolving credit facilities are eligible for CBILS and the interest for the first 12 months may be covered by the government.
Completion can take place very quickly, often within two to three days.
When your business has solid assets, such as commercial kitchen equipment, you can raise funds against them using asset refinancing. These facilities can work much like a loan or a sale-leaseback.
Security being offered, you can benefit from a lower rate than those offered through an unsecured loan, and more flexible criteria.
These installations can often be completed in 7-10 days.
Commercial mortgages can be used to raise capital against your business premises, up to a maximum of 75% of the value of the property.
The rates offered are generally very low, terms are available up to 25 years and the criteria are flexible, depending on the lender chosen.
Commercial mortgages come with a set-up fee for appraisal and legal fees and can take around 8 weeks, so they are not ideal when funds are urgently needed or cash flow is very low. .
When financing is needed quickly and needs to be secured by real estate, a bridging loan can be used to finance your need quickly.
Bridge loans can be made for up to 70% of the value of commercial properties and can be taken out for up to 36 months, although 12-18 months are more common. Monthly interest charges can often be built into the loan.
Applications are based on the security offered and your planned exit route (your method of paying off the loan), with less of a concern with accounts and credit history.
Financing can be arranged in 7-10 days and it can be an ideal temporary solution while you wait for the end of a commercial mortgage.