Businesses in all industries are feeling the effects of the COVID-19 pandemic. There has been a lot of advice in the press about stimulus packages for the economy, which sounds like a huge positive, but it doesn't break down how exactly you can fund your business during these tough times. In this article, Garry Hemming of ABC Finance looks at your options including the grants and other government interventions, as well as the traditional commercial finance market.
New government funding
These can be broken down into three major wins for those in the laundry and cleaning industries.
Small business rates relief (SBRR)
Companies whose premises have a rateable value of £15,000 or less and operate from a single property qualify small business rate relief. For businesses with a rateable value of £12,000 or less, they pay no rates.
Those with a rateable value between £12,000-£15,000 will pay reduced rates on a sliding scale.
To apply contact your local council. Their website can be found through the local council finder tool on the government's website https://www.gov.uk/find-local-council
Small business grants
Businesses who qualify for SBRR are also eligible for a small business grant of £10,000. They work as follows:
They are managed through your local authority;
The local authorities will receive the funds in early April and will distribute it shortly after;
There is no need to take action, these funds will be issued to you as soon as possible.
Coronaviris business interruption loan scheme (CBILS)
For most businesses, the above grant will be useful but won't be enough alone. To help, the government has also created the CBILS, managed by the British Business Bank. This funding will be made available to lenders and is guaranteed by the government, meaning that if you don't pay, the government will. This encourages lendes to issue loans to businesses who would otherwise be considered too high a risk. These loans as available up to £5,000,000 as business loans and overdrafts. Further details including details of the lenders involved at the British Business Bank website.
Traditional borrowing tools
The commercial finance market is still active and able to help. It is worth remembering that the CBILS will be passed through traditional business finance providers. The main products are
Unsecured business loans. Although some lenders have restricted lending or even accepting new applications there are some strong options available. Key points- loans from £5,000 to £500,000; terms from six to 60 months; the rate charged will depend on the strength of your business and your credit history; funds in five to seven days. No lenders are currently restricting lending to the laundry and cleaning industries, meaning that your sector is in a strong position. The flip side is that because you are not offering any security to the lender, these loans tend to have tighter criteria than the other products.
Secured business loans. These loans work in much the same way as unsecured business loans except the lender takes a charge over a property. The property does not have to be your business premises, it can be your own home or investment property. Whichever property you offer as security will be at risk if you fail to keep up repayments. Key points- as security is being given, the rates offered by lenders are lower than unsecured loans and loan sizes larger; borrow from £26,000, no maximum; terms usually up to 25 years; and applications usually take around 14 days.
Asset refinance. Asset refinance allows you to raise funds against your business 's assets and equipment. Key points- like a secured business loan, you are offering the lenders security over an asset, which means that it may be easier to secure funding; you will benefit from cheaper borrowing, however the assets will be at risk if you fail to make the payments so this must be considered alongside the cost; asset refinance applications can usually be completed in seven to 10 days.
Commercial mortgages. Commercial mortgages are available up to 75% loan to value for your sector (htpps://abcfinance.co.uk/ commercial-mortgages/); you can remortgage to a new lender to release equity from your property; terms of up to 25 years; borrowing can even be taken on an interest-only basis to keep costs down; completion in around eight weeks.
Bridging loans. Bridging finance is designed to be a short-term loan, secured against property to cover a gap in funding such as a cash flow emergency. Bridging loans won't usually be the first port of call but can be an invaluable lifeline (https://abcfinance.co.uk/bridging-loans/); the rates charged are higher than commercial mortgages; complete in seven to 10 days. Lenders asses in 7-10 days on the security offered and your planned exit.This means that funding may be available with poor credit history or your accounts aren't strong.