How innovative companies can raise finance in the new Covid World.

Life is certainly not what we’re used to. Children are out of school, friends and family meet ups happen in the virtual world, and you can’t even nip out unless it’s really necessary.

We’ve all had to change the way we live and work, and it’s starting to feel like the norm.  But it’s important to remember that we will come out of this.

The ‘post covid world’ won’t be the same as before, and people will change and adapt their habits and lifestyles as they always do. Business will be different.

Every business will have experienced different challenges over the past couple of months, but cashflow has been a common concern. 

Government help

The Government introduced a variety of different measures to help businesses in these unprecedented times. (NOTE: Most of these are no longer available in 2021):

• Coronavirus business interruption loans
• Bounce back loans
• Coronavirus Job retention scheme
• Small business rates and Retail, leisure & hospitality grants
• Deferment of VAT bills
• Deferment of income tax bills
• Mortgage holidays

(More details of all of these can be found on the Coronavirus Knowledge Hub)

These measures are helping some businesses to survive in the current lockdown, but innovative companies often need a different approach.  

Help for tech companies

There are other options for these companies to consider: 

R&D Tax credits

• Around 1/3 of qualifying spend can be claimed back from HMRC.. Other tax credits might be available where there has been capital spend. See our R&D Knowledge Hub.

Future Fund

• Convertible loans from £125k to £5m were available, subject to at least equal match funding from private investors. This has now closed.

Grants

• Innovate UK have a pilot programme of loan competitions over 3 years to the end of 2020. A further £750m is committed.

Third party lenders

• A number of alternative third party lenders may be considered.

Cash from the investment community, that would qualify for SEIS & EIS relief

• In return for the business raising capital the investor receives favourable income tax and Capital Gains Tax Exemptions. See our factsheets on SEIS and EIS.

It is vitally important to be on top of cashflow and make sure that forecasts are continuously updated. Where there is a need for finance look into the various options and seek advice.

The 'new norm'

When lock down is lifted and we get to the ‘new norm’ there will be many business issues to consider:

• How quickly will customers come back to us?
• Will spending habits change?
• Will we have to spend cash to adapt our set up to comply with new regulation?
• There are new opportunities we want to take advantage of but how can we fund that?
• Will our cash reserves recover in time to fund the first payroll run after the furlough period? 
• What impact will the Coronavirus support measures have on our cashflow?
• How can I fund deferred bills?

The answer to these questions will vary, but all businesses will need to formulate plans.

You have to continuously look forward and consider all possibilities - never more so than during uncertain times.