How Can You Keep Your Business Afloat During Coronavirus?
Businesses of every size and across a broad range of industries have faced the toughest eight or nine months they’ve ever had to endure. Since the first lockdown in March, businesses in retail, hospitality, leisure, tourism, service providers and more have had no choice but to stand back and watch their revenues plummet, in some instances, to absolutely nothing. While government support has been available to many of those businesses to soften the blow, the impact has still been devastating.
Just as things were starting to get back to normal, along came lockdown 2.0 as a further blow to businesses that were just starting to get back on track. However, recent developments, namely the development of an effective Covid-19 vaccine, suggests that things could return to something resembling normality in early 2021.
So what can businesses that are already struggling financially do to survive the next few months and make it through to next year? Here’s our guide.
Apply for a Bounce Back Loan
The Bounce Back Loan Scheme was introduced in May of this year to get money to small businesses that were struggling to access funding through the much-maligned Coronavirus Business Interruption Loan Scheme. To date, more than one million Bounce Back Loans have been approved, giving small businesses access to over £30bn of funding.
If you’re struggling financially, this low-interest loan will provide between £2,000 to £50,000, up to a maximum of 25% of your annual turnover. That could be the lifeline you need to get you into next year. The scheme is open for applications until 31 January 2021 to any business that is based in the UK, was established before 1 March 2020 and has been adversely impacted by the coronavirus. Importantly, the loans are 100% guaranteed by the government. That means, if the business fails and you have to liquidate with a Bounce Back Loan, you will not be personally liable for the repayment.
Defer your VAT payments
VAT registered businesses were given the option to defer their VAT payments due between the period of 20 March and 20 June, providing a welcome cash flow injection at the time. Initially, those deferred payments had to be paid in a single lump sum by 31 March 2021. However, it has been announced that businesses can instead choose to pay the deferred VAT in interest-free, monthly instalments over 2021-2022.
In effect, that means your VAT liabilities will not need to be paid in full until the end of March 2022. That will provide some respite and allow businesses to use funds that would otherwise have to be paid to HMRC to keep them afloat.
Make an informal debt repayment arrangement with your creditors
If you have outstanding liabilities owing to suppliers, landlords and other creditors that you are struggling to pay, you could enter into an informal arrangement to spread the payments over time. Landlords, suppliers, HMRC and other common creditors know that many businesses are struggling through no fault of their own and may be willing to give you more time to repay your debts. That could provide the breathing space you need to make it into 2021 and beyond. Creditors will usually be willing to listen to your proposals because they’ll typically stand to receive more of the money they are owed than if your company was liquidated.
Before contacting your creditors, carefully calculate how much you can realistically afford to pay every month. With so much uncertainty, that can be tricky, but be realistic and don’t overstretch yourself. If you do not deliver on your promises, it’s unlikely you’ll get a second chance, so make sure your proposal is affordable.
Enter into a Company Voluntary Arrangement (CVA)
Much like an informal debt repayment arrangement, a CVA is an agreement to repay your creditors over time. The difference is that a CVA is a formal insolvency procedure, so the arrangement is legally binding on all parties. That means that, as long as 75% of your creditors (by value) vote in favour of the CVA, they cannot back out unless you default on the monthly payments.
A Company Voluntary Arrangement will remain in place for a period of between two and five years and allow you to continue trading while you repay your debts. It will also prevent your creditors from taking legal action against you, which will remove the stress associated with creditor pressure and buy you the time and space you need to return your business to profitability.
Work Hard to Save a Viable Business
This year has been a major blow for millions of UK companies, but if your business was viable and in good financial shape before the crisis, these strategies can help you survive until the situation improves. Just make sure you research all the potential solutions thoroughly and work hard to be in a position to hit the ground running whenever you can.
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