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Cash Flow Management and Loan Repayment

The UK Government has given number of financial support programs for small business during these difficult times.   Some of these are the Coronavirus Government Backed-up loans which provided financial support to smaller businesses across the UK that are losing revenue, and  with their cashflow being disrupted, as a result of the COVID-19 outbreak.


Some of the  UK Government support available for small businesses are:

Measure Targeted at How to Apply Status
Business Interruption Loan Scheme UK businesses with turnover less than £45 million per year Apply via company bank or one of any accredited finance providers.  Please check our article on Business Interruption Loan Scheme  for more details. Live
Coronavirus Bounce Back Loan Scheme This scheme will help small and medium-sized businesses affected by coronavirus (COVID-19) to apply for loans of up to £50,000. Apply via company bank or one of any accredited finance providers.  Please check our article on Coronavirus Bounce Back Loan Scheme for more details


Self-employment Income Support Scheme Self-employed (sole traders or partnerships only – not directors of limited companies) Apply via company bank or one of any accredited finance providers.  Please check our article on  Self-employment Income Support Scheme for more details: Online service launched 13th May 2020


When a company applied for a loan, it will record on books debit or increase Cash in Bank  and credit or increase in Liability or Bank Loan.  This liability will be reduced during your loan repayments on a monthly basis or depending on your term agreement with the bank or the financial provider.

It’s important that as early as you receive the loan,  the loan repayments should immediately be included in your cashflow monitoring and budgeting to avoid cash shortage in your business operations.

If your company is using XERO Accounting software, you can set up a loan as a bank account, or as a non-current liability.


Setting up Loan repayment in your Accounting system


If you are using XERO:

A)     Set up your loan as a bank account

  1. Add a bank accountin Xero for your loan account.
  2. Either:
  3. If your organisation is new to Xero, enter the loan’s principal balance on conversion date in your conversion balances.

B)      Set up your loan as a non-current liability

  1. Add a non-current liability in your chart of accounts.
  1. Enter the opening loan balance in one of these ways:
    • If your organisation is new to Xero, enter the loan’s principal balance on conversion date in your conversion balances.
    • Create a receive moneytransaction during bank reconciliation when you receive the loan in your bank account.


Note: Consult your accountant or bookkeeper if you need to split loan payments into interest and principal components.



Know when your Loan repayments will be due

Business Interruption Loan Scheme  – The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.  The maximum length of the facility depends on the type of finance you apply for and will be:

  • up to 3 years for overdrafts and invoice finance facilities
  • up to 6 years, for loans and asset finance facilities

Coronavirus Bounce Back Loan Scheme The Government guarantees 100% of the loan and there are no fees or interest to pay in the first 12 months. The government has also agreed with lenders that an affordable flat rate of 2.5% interest will be charged on the loan for the remainder of the loan term after the initial interest-free 12 months. The length of the loan is 6 years, but you can repay early without paying a fee. No repayments will be due during the first 12 months.



Include Loan repayments in your Budgeting tool


If you are using XERO, include your loan repayments in your Budgeting Manager.

Set up an overall budget

  1. In the Accounting menu, select Reports.
  2. Under Financial, click Budget Manager.
  3. Select your start date.
  4. To compare with actuals, set how far back you want to view (3, 6 or 12 months). Select ‘None’ if you don’t want to view actuals.
  5. Select the period you want the budget to cover. You can choose 3, 6, 12 or 24 months.
  6. Click Update to filter the budget by your selections.
  7. Enter budgeted amounts into each account field. Make sure that the Account for your loan repayment is included.
  8. Click Save at any time to preserve your changes.

For more tips in managing your cashflow, please read through our article on Managing your cashflow


Get Expert Help & Training

For more information on Government support loans and repayments, please give us a call on  +44 07828 580251 and one of our staff members will be happy to assist you.

At Libabun Accountancy our client accounting team understands that you want to spend as little time as possible updating your accounts so that you can focus on fulfilling your contracts, winning new business and enjoying your free time. We will help you on your journey with accountancy support and advice to assist you with growing your business.

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