When the Covid-19 pandemic hit, the government’s Coronavirus Job Retention Scheme (CJRS), or furlough, was a lifeline for many employers. Introduced in April 2020, the scheme supported 11.7 million jobs until it ended at the beginning of this month. So what is life after furlough going to be like for the businesses that depended on it over the past year and a half?

Firstly, It’s important that anyone who claimed furlough for their employees checks they’ve made their claims correctly. If you haven’t, you could face hefty fines from HMRC. Once you’ve done that, you might be wondering what else you can do to support your business. Although lockdown restrictions have eased and the economy is gearing back up, there are still challenges to overcome. Beyond the end of furlough, there has been a recent rise in national insurance and surges in fuel and gas prices. On top of that, many employers are facing staff and skills shortages.

We’ll go through the financial options that are available to business owners in the UK right now. There are other initiatives and strategies that could strengthen your position and help you build a strong recovery.

What was the Coronavirus Job Retention Scheme?

Here’s a quick recap of how the Coronavirus Job Retention Scheme (or furlough) worked. When the scheme was introduced, the government covered 80% of furloughed employees’ wages, up to £2,500 per month. In July 2021 the employers’ contribution went up to 10% and the government contribution lowered to 70%. Then in August and September, the employers’ contribution went up again to 20%, with the government contributing 60%.

Although the scheme is over, you still have until 28 October to make sure that you’ve not made any administrative mistakes. The Treasury is expecting to see fraud and error in about 10% of claims, and will be investigating them. Just last week, news broke that tax officials have seized £26.5m, previously paid out through furlough by a man who made up three businesses.

The latest data shows that between April 2020 and mid-September 2021, the scheme cost the government £69.3 billion. This isn’t something that HMRC will sleep on. You can access the service by using your Government Gateway user ID and password that you received when you registered for PAYE online to log in here. Be sure to check you’ve claimed for the correct people and the time periods they weren’t working, especially if you used flexible furlough.

It’s important that you get ahead, so set some time for yourself or with your accountant to review thoroughly. It might turn out that you owe some money to HMRC to avoid paying interest or being fined. Making sure you have the resources to do this properly is crucial. If you end up needing to access cash quickly then a flex loan might be a useful tool to help you manage unexpected operational costs like this.

Work out what you can afford

A lot of business owners will have made some tough decisions recently about bringing back furloughed employees. If you’ve kept these team members on then you need to be sure your business can support their full salaries. The simplest way to work this out is by creating a cash flow forecast. Cash flow, or working capital, tells you how much money your business has after you factor in all your expenses and the money you’re expecting to make. You can download our free template here.

Once you know how much cash your business can spend, you’ll need to decide what the best way of using it is. While you might be able to afford to pay full salaries if business is picking up again, you may have other more important expenses to cover as a result. Perhaps upgrading your website or warehouse space is a pressing issue right now.

Whatever you decide, being upfront and honest with your team is crucial. You might decide that you need to change the number of hours your staff work or make some redundancies to manage your wage bill. If that’s the case then you can use our guide to changing your employment terms or managing redundancy processes after furlough here.

Financial tools to support small businesses

Feeling confident in your cash flow is what every business aims for. Mark Cherry, National Chair of the Federation of Small Businesses (FSB) has commented that right now, small businesses need to have funds “to retain and recruit as we head into the critical final quarter of the year”. If business is starting to pick up again or there are opportunities out there then you’ll need to make sure your team is in place to make it happen.

With a busy season starting up for many industries, here are a few things you could explore to strengthen your cash flow and keep business moving.

Other government support

  • Just because furlough has ended doesn’t mean that all government economic support has ended too. For retail, leisure and hospitality businesses, Business Rates Relief offers a helping hand. The rate was lowered to 66% for these industries and that is continuing until the end of the tax year in April 2022.

  • The Recovery Loan Scheme (RLS) was introduced as a follow up to Bounce Back Loans and the Coronavirus Business Interruption Loan Scheme (CBILS). Businesses that have been affected by Covid-19 can use the scheme to help fund their recovery and build for the future. At MarketFinance we’re offering up to £250,000 under the scheme, with interest-only payments for the first six months. The scheme is closing at the end of this year, so if you’re interested you can learn more about how to apply here.

  • Businesses in or linked to the hospitality industry (such as suppliers) saw VAT reduced to 5% until September 2021. Currently, the rate is still reduced but is higher at 12.5%. If this applies to your business then you can enjoy the lower rate until 31 March 2022.

  • UK Research & Innovation offer Innovate UK grants to provide funding for R&D projects. Many industries can benefit from these grants to encourage innovation. As these are grants, you won’t have to pay a penny back.

Non-government funding

Although government-backed schemes have been a lifeline for lots of businesses, there is of course traditional business finance and alternative funding around to support you. If you could use a boost to your finances then here are a few options to consider:

  • Business loans – if a quick cash injection suits your business needs then a loan could be the ideal solution. If you aren’t eligible for a Recovery Loan Scheme (RLS) loan then many banks and lenders will have other options available. Or, if you want up to £100,000 of flexible working capital to keep your business running smoothly then a flex loan might be a better choice. You can withdraw as and when you need cash and repay on your terms.

  • Invoice finance – if cash flow is strained then invoice finance can help you free up funds from your outstanding invoices when you need them. You get up to 90% up front and pay a small fee to the lender. We’ve put together a guide on how it works and what kinds of businesses it’s best for here.

  • Asset finance – if your machinery or vehicles need an upgrade then one of the simplest ways to cover the cost is through asset finance. What it means is that you use these assets as security against the funds you borrow to buy them. The current tax super-deduction can help you save on your corporation tax bill

  • Business overdraft – just like your personal bank account, an overdraft lets you dip into cash when you need it. If you set one up with your credit card provider then you’ll be able to cover costs before you have the funds in your account. Just make sure you’re clear on the interest you’ll need to pay each month.

Preparing your business for life post-furlough

Now that the furlough scheme has ended, it’s important for business owners that used it to be on top of their finances. Luckily there’s other financial support available to help you fund your next business move and keep the wheels turning. Once you’ve made sure your claims are all correct and you’ve planned your future cash flow, you can decide what tools you need to use to boost it.

Want to explore your funding options but aren’t sure where to start? Tell us about the cash flow challenges you face and we can help match you with the right solution for your business. Simply fill out this form and we’ll be in touch!