Furlough and Coronavirus Business Loan Schemes Extended6 Oct 2020
As furlough and coronavirus continue to run in motion fuelled by the new variant, the Chancellor has extended key schemes to support businesses and employees through to spring, when the Government hopes the twin vaccines will begin to slow the pandemic.
The Job Support Scheme and the Coronavirus Business Loan scheme will now be extended until 30th April 2021 to try to minimise business disruption while the higher tiers are in place. The additional funding is believed to be in the region of £68 billion.
The Government has also set a date of 3rd March for the Budget, which it states “will set out the next phase of the plan to tackle the virus and protect jobs.”
According to the Chancellor, the schemes and the Budget date have been extended to give businesses a greater degree of certainty so that they can plan ahead with confidence that support is available.
The Job Support Scheme
The Job Support Scheme was due to be reviewed in January to see if economic conditions had improved sufficiently to allow employers to contribute more to the scheme. However, given the present difficult circumstances, the Government has decided to extend the scheme in its existing form.
These are the main elements of the revised Job Support Scheme, which was announced on 22nd October as part of the Government’s Winter Economic Plan:
The scheme tops up salaries in firms that cannot take employees back full-time.
The scheme operated from 1st November and covers all nations of the UK.
For every hour not worked, the employee is paid up to two-thirds of their usual salary.
The government provides up to 61.67 percent of wages for hours not worked, up to £1541.75 per month. This more than doubled the maximum payment of £697.92 under the previous rules.
The employer’s contribution to unworked hours was reduced to just 5 percent.
The minimum hours requirement was reduced from 33 percent to 20 percent, so employees working just one day a week are eligible.
Business Loan schemes
There are three emergency loan schemes available to businesses - Coronavirus Business Interruption Loan Scheme, Bounce Back Loan Scheme and Coronavirus Large Business Interruption Loan Scheme.
All three schemes are being extended until the end of April, with applications for the Coronavirus Business Interruption Loan Scheme (CBILS) open until the end of March 2021.
The CBILS scheme offers small and medium businesses loans of up to £5 million in three ways – term loan, invoice finance and credit facilities. The original scheme term was a maximum of six years, but this changed to a maximum of 10 years.
The funds can be used for different purposes – mergers and acquisitions, refinancing existing loans or investing in future growth. The loans are guaranteed 80 percent by the Government and the interest rate is determined by the lender based on the type of funding. No personal guarantee is required.
The Bounce Back Loan Scheme BBLS is aimed at smaller businesses and provides loans of 25 percent of annual turnover up to a maximum of £50,000. The loans are guaranteed 100 percent by the Government and the interest rate is fixed at 2.5 percent for the term of the loan.
The original loan term was a maximum of six years, but this has now changed to options of six or ten years, with payment holidays available.
Read More: BBLS And CBILS: What You Need To Know
Plans for future Government support
Although there have been no official announcements, commentators believe that future support schemes will have a greater focus on recovery, growth and job creation through 2021.
One rumour that’s circulating is a move to finance grant schemes available through Local Enterprise Partnerships to support the creation of new jobs.
The Government’s specific plans are likely to be announced in the spring Budget.
Commentators also noted a possible announcement of a 45-day redundancy notice period – a move that would coincide with a Budget 45 days before the end of the current support schemes.
Accounts and Legal can help
Making decisions about furlough and coronavirus financing are complex issues and require thorough consideration before you take any final decisions. Our small business specialists, tax accountants and solicitors can help you identify the type of support that is most suitable for your business and get you on the road to recovery.
If you would like to speak to a small business adviser to learn more about furlough and coronavirus, please contact us on 0207 043 4000 or firstname.lastname@example.org.