As the UK continues into its second month of lockdown, businesses across the country are feeling the strain. During this time, managing cash has become more critical than ever before.
When government schemes are combined with adequate planning, there will be a way through the crisis for many businesses. Here are three tips to help ease cash flow during COVID-19.
Tip 1: VAT Payment Relief
The government has given businesses the option to defer VAT payment due before 30 June 2020. Those that delay VAT won’t have to pay it back until 31 March 2021. The scheme relates to the following charges:
- Quarterly and monthly VAT payments for February, March and April.
- VAT payments on accounts due between 20 March and 30 June.
- Annual accounting advance payments due between 20 March and 30 June.
Businesses don’t need to tell HMRC that they are deferring payments, so they can cancel any direct debits or planned transfers they have with their bank. However, you should continue to submit VAT returns during the period. Payments will have to be made as usual after the June deadline, so be sure to set up direct debits again.
Additionally, VAT MOSS and import VAT still needs to be paid. If you are struggling to do so, you can contact HMRC’s Time to Pay service for extra help.
Tip 2: Take Advantage of Available Grants and Loans
There are several ways that companies can access extra cash.
Consider the government-backed options first as they offer low interest rates and little or no initial capital repayments. These loans include: The Business Support Grant, Bounce Back Loans, CBILS and Large CBILS
Companies could also begin to explore other grants and forms of tax relief. While these aren’t COVID-19 related, they are a useful way to get some extra cash flowing in.
SMEs that have engaged in Research and Development, whether successful or not, may be able to claim corporation tax relief if they can show their research meets specific criteria. Companies that successfully apply for relief can deduct an extra 130% of their qualifying costs from yearly profit, or claim a tax credit worth up to 14.5% of the surrenderable loss if they are loss-making.
Innovate UK’s Open Grant Funding Programme is investing up to £25 million in innovative commercial ideas. Those who wish to apply should check out the eligibility requirements and do so by 27 May. There are also a variety of innovation competitions that you can explore.
A final option comes from Facebook, which is handing out $100 million (£80m) in cash grants and ad credits to small businesses worldwide to help them cover costs and connect with customers. Businesses must have between 2 and 50 employees and have been in operation for at least a year to apply.
Tip 3: Develop a Sophisticated Cashflow Plan
A plan will give business owners the insights necessary to make panic-free decisions.
- Break cash flow plans down to shorter periods. You could create weekly or even daily plans to get more control over financial planning.
- Financial scenarios are likely to change. Clients that were previously reliable payers may suddenly be unable to meet invoice deadlines. Scenario planning can help you prepare for when things begin to go wrong by looking for lines of credit or new funding opportunities in advance of when you need them.
- Look for ways to reduce immediate costs. Explore options such as cutting non-essential variable payments, postponing investment plans, or negotiating invoice extensions.
Reparo Provides Quick Financing for Businesses Struggling with Cashflow
Reparo can help if your business needs further assistance to ease cashflow problems. As an alternative lender, we provide asset-backed loans to businesses in a variety of situations. Our solution is a good alternative for companies struggling with COVID-19 related cash flow issues. Here’s why:
- We are fast. Even with social distancing restrictions in place, our team can make loan application judgements within days or hours and quickly provide access to cash to those who are accepted. This can help businesses that suddenly face unexpected issues.
- We are flexible. We don’t have fixed lending criteria. Our team of experts has significant commercial experience, which means they can quickly get to grips with your business model and make a decision based on the merits of each application.
- We are friendly. We’re always happy to pick up the phone and have a chat about any business.
If you’d like to discuss a business loan of between £25,000 and £1 million, please get in touch with a member of our team on firstname.lastname@example.org or by calling 0161 451 5710.