Lockdown in 2020 led to a raft of government initiatives being introduced to support businesses through the financial pandemic that came on the back of the health pandemic. A number of these schemes involved the provision of funding or taxable grants to businesses through the likes of the bounceback loan scheme, coronavirus business interruption loan scheme, or the furlough scheme.
A lot of these schemes were hastily introduced and therefore were quickly revised, but whether or not they changed nearly all of them are now starting to come to an end, or are beginning to fall due for repayment.
Some of these are coming to an end as soon as 30 September 2021, including the furlough scheme and the restriction on being able to issue winding up petitions and statutory demands, which have often been seen as an essential tool to aid debt recovery.
What is happening now?
Bounceback loan repayments have commenced for most, but some are still not quite there. Many who took the loan because they were not entitled to any other government grants are now scratching their heads about how to repay those loans.
If that is you, don’t panic. You can look into either the capital and/or interest repayment holidays that have been built into the schemes. Borrowers can look to extend the length of the loan from six years to 10 at the same fixed interest rate of 2.5%. They can also make interest only payments for six months with the option to use this up to 3 times throughout the term of the loan. Lastly, they can request a six month repayment holiday once during the term of the loan. These are known as the pay as you grow options.
When it comes to commencement of repayments of the coronavirus business interruption loans that people have taken, there have already been a large number of casualties who have simply did not have the funds to make these repayments. Construction related borrowers are suffering particularly badly as supplies become scarce and raw material prices increase. Some lenders do have forbearance procedures that will allow deferral or variation of the terms. However, there are a number of the nonmainstream banks who do not have the ability to be so flexible. This lack of flexibility will not be driven by a desire to play hardball, but will be down to their own inflexible lending terms, which if not kept to will mean they cannot call upon the government guarantee.
30 September 2021
As the furlough scheme comes to an end, there is uncertainty whether businesses will now be able to reintroduce those staff to the workplace, whether on a practical or financial level, or whether there will be surge in job losses. sadly, there are no magic rabbits to pull out of hats when it comes to knowing what best to do, or how to encourage workers who have had the benefit of being paid not to work, to come back in and work for a living. All we can do is hope everyone continues to pull together as the next month or so unfolds.
Winding up petitions and the ability to use statutory demands are being reintroduced. However, the government have decided to attempt to soften the blow and made it a requirement that the debt must be £10,000 or more before a winding up petition can be issued. They have also introduced a 21 day breathing space between a company being notified that a winding up petition may be issued if payment is not received, and that petition being issued.
Those who are owed money are likely to welcome this change as they now have the ability to aggressively pursue their debts. It is often seen as an effective way of getting cash into a business. This could be a little shortsighted given many businesses have suffered financially, but each organisation will sadly be left with no choice but to put its own interests before those of others.
Such action may of course lead to a raft of companies seeking a formal insolvency process, such as a Company Voluntary Arrangement, or even one of the two brand new procedures introduced during Covid, the Moratorium. The Moratorium provides a self-imposed mandatory breathing space of 20 business days, which can be extended beyond that without creditor consent for another 20 business days, and/or the creditors beyond that, or even with the permission of the court. It stops nearly all payments needing to be made to historic creditors. There are a number of conditions that must be met, including not running up more debts, but if breathing space is needed for a business that will survive, it is perfect.
Company directors will be well advised to consider their options early on given legislation was introduced in 2020, which largely went unnoticed because of Covid, where company directors can be made personally liable for certain tax debts. As with most things, there are certain conditions that must be fulfilled, but given HM Revenue and Customs have a rather large hole to fill it is likely they going to be looking into every possible avenue.
31 December 2021
For those looking to take out new finance, the recovery loan scheme may be ideal. Though not as generous with the coronavirus loans or the bounceback loans, up to £10 million is available per business with the government guaranteeing 80% of the finance this time around. This scheme is only open until 31st of December 2021 and will be assessed on similar criteria to that of the other government supported schemes. The good news is that no personal guarantees will be taken facilities up to £250,000 and a borrower’s principal private residence cannot be taken as security.
25 March 2022
The latest date of the final business related Covid measure ceasing to exist is this one in relation to commercial rent eviction and/or commercial rent arrears recovery. This measure prevented commercial landlords from taking action to prevent a tenant from occupying its premises or seizing its goods. However, this legislation did not stop the landlord from seeking a County Court judgement against his tenant in relation to arrears of rent. Having a County Court judgement against your name will affect you getting further credit and/or affect your current banking facilities, thereby providing tenants with an indirect motivator to make some form of payment to the landlord.