As we exit the second national lockdown of the year and enter strengthened
Tier 2 restrictions, businesses are continuing to feel the strain of the pandemic.
It therefore remains vital to know your options around the financial support
that could help your business to recover and prosper post-pandemic, and how
best to approach providers of finance.
MSIF Investment Manager, Sue Chambers, discusses the importance of investment readiness and how best to prepare for funding success during a time of elevated uncertainty.
Sue Chambers, MSIF Investment Manager
Knowing your options
When applying for funding, you should ensure that you have
explored all opportunities for
financial support during this time.
Firstly, you should be utilising any free resource that is
available to you as a small to medium-sized business. We would encourage you to
approach your local chambers of commerce and business growth hubs as they have
a plethora of connections to best help your business, in addition to the latest
advice derived from central government sources. The Liverpool City Region Growth Platform is
a great place to start for any businesses situated within the LCR as the site
also includes the latest information on any localised grants that may be
available.
Be sure to check what government grants you may be eligible
for as a company as well as ensuring you have utilised the Job
Retention Scheme where appropriate to help both sustain your business and
preserve jobs via the gov.uk website.
If government and/or local support is not sufficient to get
your business through the winter, you may want to consider a Bounce
Back Loan (BBLS) if you are looking for funding up to £50,000 - or alternatively,
a Coronavirus
Business Interruption Loan (CBILS) if you need more than that.
If you have already taken out a Bounce Back Loan, you may be
able to top this up to £50,000 and you should contact your original provider
for further information. You can have either a BBL or a CBILS but not both.
CBILS can also be applied for and used to repay a BBL. If you want to apply for
either of these loans you need to do this before
the schemes end on 31st March 2021.
In the first instance, our best advice is to try your own
bank first for CBILS/BBL support. If they are unable to help, then you can
apply to other providers. MSIF as an
example is able to support businesses with a CBILS loan through both their
dedicated Coronavirus
Recovery and Resilience Fund in addition to the Northern Powerhouse Investment Fund - NPIF
Microfinance, jointly managed with GC Business Finance.
Investment readiness
Before you look to access external funding, make sure you
have a full business plan ready – including an explanation of how your company
has been adversely affected by the Coronavirus pandemic, your plans for
recovery and what you intend to use the funds for.
Cash flow forecasts also need to be incorporated and be as
realistic as possible. For example, if your business is connected to the
hospitality and retail sector, you may want to assume that there could be a
further delay before trading is back to normal. It will also be useful for a
funder to see a sensitised version of your forecasts that takes account of
possible further lockdowns or slower recovery – say reducing revenues (and
associated costs) by a prudent percentage per month.
The cash flow forecast will serve to both highlight the
amount required, building in some headroom as it is only a forecast, and help
to evidence ability to meet the loan repayments. It is also important to detail
any assumptions you have made in the cash flow. At a time when funders can’t
get together face to face to discuss your financial workings it is crucial that
you explain how you have arrived at the amount of loan you are looking for.
Communication is key!
Benefits of funding
There are some real benefits of securing funding during this
time. It can help create additional headroom and breathing space for your
business, but you need to be sure to apply for sufficient funds to get through
the next 6 months and beyond.
Additional funding can also help with the retention of staff
and could avoid the need to retrain new staff in the future if unnecessary
redundancies are made.
Of course some
businesses are seeing growth opportunities during the pandemic and as
long as they can show they have been adversely impacted by COVID in some way,
then BBLs and CBILS can also be used for investment purposes.
Overall, you are best preparing yourself to hit the ground
running when Covid restrictions are eventually eased and we can all return to
‘normality’. Now is the time for recovery and resilience.
If you are successful in applying for BBL or CBILS funding
the government will cover all fees and interest costs for the next 12 months
allowing you breathing space to focus on getting your business back on track.
You can also use the funding to repay any delete ‘any’ existing funding if it
will help put your business on a more stable financial footing, but lenders do
have a limit attached to the amount they can refinance in this way.
Implementing new finance into your business
Only you, as the leader of your business will truly
understand what your priorities are and where the extra funding will be needed
most. This will vary from business to business, including covering business
rates and rent, paying suppliers and, despite best efforts from the government,
staff costs.
The key thing is to ensure that you have explored all
options to make the most out of any assistance available.
By having these conversations, you are not only best
preparing your business to re-start or continue to operate, but you are putting
yourself in the best position possible for success when applying for additional
funding. Make sure you have a clear plan of where that money needs to be
deployed, to mitigate the risk of asking for too little or too much investment.
Be open and be honest in your conversations with any
potential funders, during a time of continued and increased social distancing.
It is imperative you include as much detail as you can to supplement your
application.
Yes, there is light at the end of the pandemic tunnel but we
need to be prepared for the financial challenges 2021 may present as a result.
