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Comment: KPMG's advice on accessing government support

Blair Nimmo, UK head of restructuring at advisory firm KPMG, tells businesses to make claims “clearly, early and with evidence” for the best chance of securing extended credit quickly. 

KPMG's UK head of restructuring, Blair Nimmo

KPMG’s UK head of restructuring, Blair Nimmo

In the current environment of dramatically falling consumer demand and great uncertainty, those running the UK’s businesses will wish they had all the answers – but the truth is no one does. 

Forecasting, cash preservation, engaging with funders and other stakeholders and accessing government support initiatives all need to be at the top of the to-do list.

Liquidity is the number one issue. Undertake cashflow forecasts as a matter of urgency. Run them on a weekly basis, extend the horizon from the usual 12 or so weeks to 26 weeks, and do them on a granular receipts and payments basis.

Understand the business’s payment position on everything including payroll, suppliers, bank interest, tax, pension commitments and consider which are most critical.

The coronavirus Job Retention Scheme (JRS), under which Revenue and Customs will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month for each furloughed employee, is of huge significance and is to be welcomed.

But as it is to be run as a reimbursement scheme, employers will still be required to make payroll payments, which will then be recovered once Revenue and Customs has established the necessary systems. And with the likelihood that this may take some weeks to set up, March salaries will need to be paid as a matter of priority.

To this end, we see funding as a key component for many businesses, supplemented by the JRS, and coupled with a greater deployment of Time to Pay by HMRC, which relates to deferral of tax obligations, being agreed on a case-by-case basis. This is in addition to sector-specific support such as rate payment holidays.

Engaging with funders is going to be critical for many. And funders are facing their own challenges at the moment, addressing a significant upsurge in demand for credit; fulfilling a role as the distributor of some of the government’s business loan support; and handling some degree of staff absences. Also, while funders are going to be relaxing their position on lending, they will still be making rational credit decisions.

It is important that a business’s case for extended credit is made clearly, early and with evidence. We are advising clients to ensure they maximise their chances of getting the financial support they seek in three ways:

1. Clearly – Understand your requirements as soon as possible

Get a clear view on the liquidity needed to get through this period in order to define the requirements for additional funding. Lenders will be considering not only whether the request is reasonable but whether enough has been sought, as well as when and how will they get repaid.

2. Early – Get to the front of the queue

We expect many companies to request additional support, so a key challenge for lenders is likely to be processing the volume of applications.

3. Evidence – Make a well-grounded request

Produce a credible deliverable plan that articulates the health of the business prior to the crisis; the self-help action being taken; and how the business will return to health afterwards.

The government support initiatives available to businesses – including the Covid-19 Corporate Finance Funding (CCFF) facility for large firms and the Coronavirus Business Interruption Loan Scheme (CBILS) which seeks to support lending to businesses with turnover of less than £45m – are evolving regularly at the moment, and it may be difficult to keep up. This will stabilise, but it’s wise for management to try and ascertain what is relevant to their business early.

Advisers are also working through this and indeed waiting for clarity on some schemes, but many have useful checklists to share.

It’s also important to remember that in practical terms, many of these initiatives are being established from a standing start, so processing will take time. Regardless of how quickly you might apply for help via these schemes, any sensible cashflow planning would have the cash benefit of these measures coming after April. What you can do under your own steam in the intervening period is critical.


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