The present pandemic has created just the right conditions for certain businesses to trade their way into insolvency.

As we start the gradual withdrawal from lockdown, consumers will be on the lookout to spend after months of enforced home “arrest”. This will likely fuel an increase in economic activity on an unprecedented scale as we bounce-back towards pre-pandemic levels.

But isn’t this good news?

Under normal circumstances, yes, this is great news, but unfortunately, many businesses have needed to spend reserves and borrow in order to survive the last fifteen months of COVID disruption. They are standing on the starting line for a marathon, wearing slippers; unprepared financially for what is about to unwind.

Does your business fit into this category?

• Cash reserves are limited
• Losses have stripped away accumulated profits
• You are obliged to offer better terms of trade to your customers than you receive from your suppliers. i.e., you sell goods on say 60-days credit terms but pay your suppliers for raw materials cash on delivery.

But why does this matter if sales are profitable?

When you sell goods on credit – 60-days in our example – for those 60 days you will have to pay suppliers and other overheads, wages, rent and other costs, before cash arrives in your bank account for sales made almost two months ago.

Ironically, the more successful you are in creating new sales, the more damaging this funding crisis potentially becomes. In accounting speak, you will be over-trading.

Planning is critical

If your business fits the description we have outlined above it is imperative that you plan your business growth. It may still be possible to manage higher sales as long as you organise cash-flow support to fund costs until higher sales, and therefore retained profits, provide you with the resources to self-sustain future growth.

No business owner should have to suffer the financial tragedy of over-trading through lack of planning. Pick up the phone, we can help.

Considering a home build? It would seem that government is keen to support this activity as they have just announced new plans to provide over £150 million in new government funding. This is aimed to make it easier and more affordable for people to build their own homes.

The ‘Help to Build’ scheme will ensure that self and custom home building can become a realistic option to get onto the housing ladder through lower deposit mortgages.

Lowering the required deposit will free up capital, so people can build the home that they want and need whether it’s a commissioned, made to order home, or a new design from scratch. The scheme will provide an equity loan on the completed home, similar to the Help to Buy scheme.

Made to order homes allow people to customise the home they want based on existing designs. This could include more office space, or a particular design to support a family’s requirements including for disabled or older people.

Self and custom build could deliver 30-40,000 new homes a year: a significant contribution to the country’s housebuilding ambitions.

The scheme is part of the government’s wider Plan for Jobs as the new plans will also benefit small building firms. SME builders account for 1 in 10 new homes and the scheme will help scale up the number of self and custom build homes built every year.

This follows the news that major lenders have signed up to the government’s new 95% mortgage guarantee scheme to help more people than ever on to the housing ladder. Lloyds, Santander, Barclays, HSBC and Natwest are launching mortgages under the scheme with Virgin Money following next month.

A new government backed loan scheme was launched 6 April 2021.

A recent news story confirming the details is reproduced below:

The scheme, which was announced at budget and runs until 31 December 2021, will be administered by the British Business Bank, with loans available through a diverse network of accredited commercial lenders.

26 lenders have already been accredited for day one of the scheme, with more to come shortly, and the government will provide an 80% guarantee for all loans. Interest rates have been capped at 14.99% and are expected to be much lower than that in the vast majority of cases, and Ministers are urging lenders to ensure they keep rates down to help protect jobs. The Recovery Loan Scheme can be used as an additional loan on top of support received from the emergency schemes – such as the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme – put into place last year.

The Recovery Loan Scheme will ensure businesses continue to benefit from Government-guaranteed finance throughout 2021.

With non-essential retail and outdoor hospitality reopening this week, Ministers intend that new support is still available to businesses to protect jobs. From 6 April 2021, businesses – ranging from coffee shops and restaurants to hairdressers and gyms – can access loans varying in size from £25,000, up to a maximum of £10 million. Invoice and asset finance is available from £1,000.

Businesses who are tempted to secure lending under this scheme should ensure that future trading will generate sufficient funds to cover interest charges and provide cash flow to repay the amount borrowed.

Please call if you would like our help to consider your options.

The mortgage guarantee scheme that was announced March 2021 is intended as a temporary measure. It will be open for new mortgage applications from April 2021 to December 2022, in line with the government’s view that the current scarcity of high loan-to-value lending is primarily a response to the pandemic rather than a symptom of a longer-term structural change in the mortgage market.

The government will review the continuing need for the scheme towards the planned end date and determine whether extending the period of eligibility for new mortgages would continue to deliver benefits for prospective homeowners.

The scheme is designed to help creditworthy households struggling to save for the higher mortgage deposits required by lenders in the current environment. For this reason, a mortgage eligible for a guarantee under the scheme will need to:

• be a residential mortgage (not second homes) and not buy-to-let
• be taken out by an individual or individuals rather than an incorporated company
• be on a property in the UK with purchase value of £600,000 or less
• have a loan-to-value of between 91 per cent and 95 per cent
• be originated between the dates specified by the scheme
• be a repayment mortgage and not interest-only and
• meet standard requirements in terms of the assessment of the borrower’s ability to pay the mortgage, for example a loan-to-income and credit score test.

The scheme is also designed to ensure that lenders cannot use the government guarantee to restructure the riskiest part of their existing loan book, and that borrowers remain the beneficiaries of the intervention.

The scheme will help to ensure the mortgage market provides options for consumers with smaller deposits who also want a mortgage with the security of predictable repayments for a longer period. For this reason, it will be a requirement that any lender participating in the scheme must offer a five year fixed rate product as part of their range of mortgages offered under the guarantee.

A National Insurance contributions holiday for businesses who employ armed forces veterans comes into force 6 April 2021.

The policy allows employers to claim National Insurance contributions relief for veterans they have hired during their first year of civilian employment after leaving the armed forces.

Who qualifies?

Employers will only be able to claim National Insurance contributions relief on the earnings of qualifying veterans. A person qualifies as a veteran if they have served at least one day in the regular armed forces. This includes anyone who has completed at least one day of basic training.

The relief is available to all employers of veterans regardless of when the veteran left the regular armed forces, providing they have not previously been employed in a civilian capacity.

Employments that qualify

Relief is available for any civilian employment. A civilian employment is one that is not part of the armed forces and includes employments with organisations that may have strong links to HM Armed Forces, such as the Ministry of Defence or NATO. Employment with a reserve organisation is not considered as civilian for the purpose of this relief and do not trigger the qualifying period (outlined below).

Self-employed individuals do not pay Class 1 National Insurance contributions. Therefore, self-employed businesses do not qualify for this relief. In addition, self-employed work does not trigger the qualifying period.

Limits on the relief

Relief will apply on earnings up to the upper secondary threshold. If a veteran’s earnings are above the threshold, employers can apply the relief on the part of the earnings below the threshold. This approach is in line with existing reliefs for under 21s and under 25s apprentices.