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Where can my business find more funding in lockdown?

Updated 05 December 2022

5min read

Nick Green
Financial Journalist

In the wake of coronavirus, many forms of business funding and help have appeared, at both a national and local level. If your small business is still hunting for the right kind of support, there may be more options that you haven’t yet considered. Article by Nick Green.

Funding for SMEs affected by coronavirus

Businesses have flocked to take advantage of the government’s funding schemes during the COVID-19 crisis, but many are still struggling to find the support they need. However, business that have encountered obstacles could yet be able to find some forms of support. Some small business owners may still be unaware of everything that is available, and new initiatives are continuing to be launched by bodies such as Local Enterprise Partnerships (LEPs), business groups and the private sector.

The Coronavirus Job Retention Scheme (better known as the furlough scheme), under which the government pays 80 per cent of the salary of employees unable to work, has now closed to new applicants. Currently around 9 million workers are furloughed, but the scheme is due to end on 31 October 2020 unless there is an extension.

There continue to be numerous other options for businesses still in need of emergency funding during the lockdown.

How effective are the government’s loan schemes?

So far a total of nearly £35 billion has been provided to businesses in the form of government-backed loans. These take three forms: the Coronavirus Business Interruption Loan Scheme (CBILS), a  similar scheme for larger businesses (CLBILS), and the Bounce Back Loans scheme. It is the last of these that has proved the most popular and accessible, with nearly £24 billion worth of funding coming via these ‘bounce back’ loans. Bounce back loans can be up to £50,000 or a quarter of the business’s turnover, whichever is greater. The money can be available in as little as 24 hours.

CBILS has provided £9.6 billion of funding, while CLBILS has helped 244 large businesses to the tune of £1.6 billion in total. However, up to 60 per cent of larger businesses that have applied for this funding are facing either rejection or a long wait.

The approval rate of bounce back loans is far higher, at around 80 per cent. CBILS loans have proved significantly harder to get, with nearly 49 per cent of all applications failing. That said, CBILS loans do offer potentially far more money – up to £5 million – so the checks on a business’s viability are much more stringent.

Which is better – CBILS or a Bounce Back loan?

Some smaller businesses that took out a small CBILS loan at the start of the crisis may be better off switching to a bounce back loan. CBILS loans may charge interest of up to 6 per cent, where bounce back loans have a fixed interest rate of 2.5 per cent. It’s worth noting that neither scheme charges interest or demands any repayments for the first 12 months.

According to accountancy firm HW Fisher, a number of small businesses have ended up with expensive CBILS loans when they could have cheaper bounce back loans. Bounce back loans can be used to pay off CBILS loans (there is no early repayment charge) so switching should be easy to do. The accountants noted that the discrepancy in cost was ‘a little known fact that banks do not seem eager to talk about’.

Support for SMEs from Local Enterprise Partnerships

Various additional business support schemes are being launched by Local Enterprise Partnerships (LEPs). LEPs are partnerships between local authorities and businesses that aim to drive economic growth in local areas, and as such are likely to play pivotal roles in the post-lockdown recovery.

Individual LEPs are setting up their own projects to support local businesses, based on their knowledge of what the area needs. One of the first of these initiatives has been launched by the Greater Birmingham and Solihull LEP (GBSLEP), and will aim to offer support in key areas such as helping businesses adapt, moving their services online, and taking measures to enable physical reopening in due course. A grant scheme is also planned.

Other LEPs that are taking firm action include the Solent LEP, which has allocated funding for ‘Restart, Restore and Recover’ loans. These RRR loans are specifically aimed at helping those businesses that have been unable to access other forms of support, and also businesses that are deemed to provide an ‘economic lifeline and essential services’ for the local economy. Loans of up to £1.5 million will potentially be available where other government help is not forthcoming.

There are also encouraging noises from the South East LEP and from the Northern Powerhouse LEP, and others are expected to follow suit. Businesses that remain in need of emergency bridging finance or other forms of support should therefore approach their LEP to see what might be available either now or in the near future.

The Future Fund and EIS

Meanwhile there have been calls for the government to provide new incentives for investors, so that businesses trying to recover will have more access to private finance. Law firm Buckworths, which works solely with fast-growing businesses, joined with 87 other signatories in a letter to the Chancellor Rishi Sunak. They point out that investors using the government’s Future Fund scheme can’t claim EIS tax relief on their investment. This, they claim, risks excluding SMEs and early-stage firms from the Future Fund scheme.

This may pose a particular problem for startups, many of which have not yet demonstrated a turnover and so may not qualify for the government-backed loan schemes such as CBILS or the bounce-back scheme. Therefore the letter calls for ‘a temporary tax relief scheme for angel investors’, warning that the UK might otherwise lose ‘a generation of SMEs’.

The proposed solution is a temporary tax relief scheme for venture capital and business angel investors, separate from EIS but operating in a similar way. The government has yet to comment on the request.

Other initiatives to help businesses

Help for small businesses in the crisis can also be found coming from the private sector. For instance, Sky Media has so far pledged a total of £2.5 million to 250 small and medium-sized businesses, to help them fund advertising. Sky’s SME Support Scheme will provide up to £10,000 per business, provided that the business is UK-based, at least a year old and employs fewer than 50 staff. The free advertising will be available through Sky’s Adsmart platform, which customises adverts to the viewer based on consumer data.

Fittingly, some of the first beneficiaries of the scheme have been on the front line of the COVID-19 crisis, and include Scotland’s Charity Air Ambulance and Bucks-based care provider Care & Carers. It is to be hoped that other large corporations in a position to help smaller enterprises may follow Sky’s lead.

Outside of grants and other initiatives, crowdfunding can be an accessible way to help raise funds for a small businesses, too.

Ask your accountant about accessing government and private-sector support for small businesses.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.