As co-ops across UK enter tougher and potentially perilous conditions, we urge them to take steps to manage risks and be proactive in seeking grant aid and advice.
Here are some actions your co-op can take:
1. Assess financial risk
It is essential that co-ops are firmly on top on their bookkeeping, accounts, cash position and cash flow forecast. Work from worst case scenarios in your forecasting. Consider what position your debtors and creditors might be in. And crucially, review the current and future balance sheet position to determine likely solvency. But most importantly of all, don’t panic. Get information and advice, then take action.
2. Ask for a local authority business grant
The UK and devolved governments are giving billions of pounds to local authorities to pay out in business grants. Details of these schemes are still emerging, but all struggling co-ops could and should be eligible, so be proactive in seeking grant support.
We know for sure that across the UK, all rate payers for premises closed by national restrictions (e.g. Welsh fire break; English lockdown) or local restrictions (e.g. Scottish levels) are being given cash grants of circa £1,000 to £4,000, depending on rateable value, per month and/or to cover the period when restrictions are expected to be in place. Whilst retail, leisure and hospitality businesses may be eligible for a grant of up to £9,000.
This time it appears there will be no eligibility requirement based on types of rates relief received (e.g. small business, charitable). We know some co-ops pay little or zero rates because of reliefs - in these cases you are still the rates payer and if your premises have been legally closed you should get the grant. Local authorities are also being funded and encouraged or told to help non-rates paying businesses forced to close.
The UK government has provided £1.1 billion to all English local authorities to support businesses who, while not legally forced to close, are struggling because of COVID restrictions. With a further £594 million announced on 5 January 2021 to be awarded to local authorities and devolved nations. Crucially they will have significant discretion in how exactly they target this money. They are likely to want to help struggling non-rates payers and micro businesses and, in some cases, the social economy.
We advise any co-op or community business that need grant support to contact their local authority and local councillor without delay. If possible, prepare evidence of:
- The negative impacts of COVID-19 on your business
- What is at risk in terms of livelihoods and economic and social value added if you do not receive support
- Social, economic and environmental contributions your co-op makes to the community, area and society
3. Use the furlough extension
The Job Retention Scheme, also known as the ‘furlough’ scheme, has been extended until 30 April 2021. Employees can work part time or not at all and will receive 80 per cent of usual salary for hours not worked, up to £2,500 a month.
You can find more information on the JRS, including HR-related FAQs here.
The previously announced Job Support Schemes, which were due to start 2 December, are postponed until further notice.
The Job Retention Bonus has been cancelled.
4. Access expert advice and support
On top of everything else, COVID is creating complex problems for co-ops in areas like finance, HR, governance and business planning/strategy. Co-operatives UK can help. Our members can access specialised guidance, training, webinars and expert advice covering all these areas and more.
- Governance advice including staging AGMs and filing accounts
- Guidance for co-ops facing financial strife
5. Consider one of the government-backed loan schemes
While taking on more debt at a time like this should not be taken lightly, your co-op might benefit from taking out, or topping up, a government-backed loan.
Government has extended the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, and Coronavirus Large Business Interruption Loan Scheme application deadlines until the end of March 2021. The Bounce Back Loan Scheme rules are also changing to allow those businesses who have borrowed less than their maximum (i.e. less than 25% of their turnover) to top-up their existing loan.
We know some co-ops have experienced difficulties in accessing Bounce Back Loans, either from their existing bank or when trying to join a new bank. We have pressed the British Business Bank to improve its guidance to lenders on co-ops. The Co-operative Bank is also offering all co-ops smooth access to Bounce Bank Loans through a dedicated relationship manager.
Governments in Wales, Scotland and Northern Ireland are also offering social economy-specific grant and low/zero interest loan packages, which most co-ops should be eligible for.
In some cases co-operative and community benefit societies could also raise new equity from members and their communities, for example through a 'Recovery Share Offer' or through donation-based crowdfunding. The Community Shares Unit has published guidance on Recovery Share Offers.
Power to Change has also teamed up with us to deliver Community Business ReBoost which provides grant funding and matched equity investment for community co-ops doing recovery share offers.