Coronavirus and the impact for Technology, Innovation and Growth businesses

These times are undoubtedly challenging for all businesses in light of the coronavirus pandemic. There are also opportunities for many technology and innovation companies, with a ramp up in demand for digital solutions and technology to support remote working.  

Whether facing a downturn or a need to rapidly scale up, any technology business should continue to exercise good governance.  

This involves planning ahead, which is particularly critical in times of rapid change. The future holds many different possibilities to be planned for, and early and frequent conversations should be held with your team, debtors, suppliers, funders.  

Funding and cashflow

You should look at what funding options are available, and how cashflow can be managed.  Much has been said about the specific new coronavirus measures in place:

• Furlough scheme available until 30 Sep 2021
• Self-Employment Income Support Scheme fifth grant covering May to September 2021
• Restart cash grants
• Discretionary funding grants from local authorities
• Business rates relief
• Reduced 5% VAT rate until 30 Sep 2021 and 12.5% reduced rate until 31 Mar 2022
• Recovery loans to replace existing loan schemes
• Pay as you grow scheme
• Culture recovery fund and other support for the arts
• R&D tax credits
• Grants for small businesses
• Innovate UK

But a business should approach thinking about what they need with the usual discipline.

There is still a place for other funding, and due process will still be followed by lenders. You will need forecasting and modelling, and conversations and dialogue with funders to persuade them that your business is where their cash should go. If equity funding is required it’s tricky to persuade investors when you can’t meet them, and you’ll need to make good use of technology to communicate and convince.

Cash to be claimed from earlier R&D

Don’t forget that an innovative business can access cash through the R&D tax credit scheme or the Research and Development Expenditure Credit. This can unlock cash from activity which happened nearly three years earlier, with the key being to identify qualifying projects and make a claim as soon as you can so that HMRC can pay you the cash.  But take care here as whilst past claims shouldn’t be affected both the R&D schemes and the new coronavirus measures represent State Aid.  This can lead to conflict and there is currently uncertainty around how this will work [link to our article on this].

Business procedures

You will undoubtedly need to amend your usual procedures to cope with the changed landscape and remote working.  You should discuss these with all stakeholders, including the bank and other funders, and ask for variation of any covenants or investment agreements whilst also continuing to comply with the Articles of Association.

With the adoption of new ways of working and the team being innovative, there is a risk that the business will fall foul of regulations such as GDPR (even though all such regulations must continue to be complied with).

Decisions and their rationale should be fully documented, with extra care around exposure to fraud and cybercrime.
IT and payroll control procedures need to continue, such as off-site backups and ensuring people can be paid with appropriate oversight. You may need to consider outsourcing some of your usual in house functions if your remote working team are unable to deliver, or if you are impacted by staff absence due to sickness.

We will keep you updated for new insights in relation to the rapidly changing world, and you should keep checking our Knowledge Hub for coronavirus related information.