Coronavirus Business Interruption Loan Scheme
James Haywood, who is a manager in our audit department, provides an update on Coronavirus Business Interruption Loan available for small/medium sized enterprises (SMEs).
As a result of the Covid-19 outbreak, the government has announced several significant financial schemes for businesses that will be hit the hardest. You will probably be aware of the Coronavirus Job Retention Scheme, offering a grant of 80% to cover salaries of any “furloughed workers”, which my colleague Jack Moore wrote an article about on 23rd March. You can read this article here: https://www.pagekirk.co.uk/news/blog/archive/article/2020/March/coronavirus-job-retention-scheme.
However, HMRC have confirmed this scheme will not be up and running until April at the earliest, which, for some businesses, may be too late. Especially if they have been affected from the very start of the Covid-19 outbreak. The government has therefore announced, with support from 40 accredited lenders and all major banks (such as Barclays, Santander and Lloyds), the Coronavirus Business Interruption Loan Scheme, which SMEs can access in order to cover any short-term cashflow troubles.
Background
The scheme provides support for SMEs by granting them access to term and asset finance loans, overdrafts and invoice finance of up to £5,000,000. Term and asset finance loans can be paid back over a period of up to six years. Overdraft and invoice finance can be paid back for up to three years.
It is important to note that these will not be interest free, but the government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any additional fees. This means that smaller businesses will not need to pay any upfront costs and will initially have lower repayments.
For security purposes, the scheme may be used for unsecured lending for loans and overdrafts of £250,000 and under. For any loans and overdraft facilities above £250,000, it will be at the discretion of the lender to offer the loan without any security.
The government will, however, be providing lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims) giving lenders further confidence in continuing to provide finance to SMEs. The borrower will however always remain 100% liable for the loan. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.
If the lender can offer finance on normal commercial terms, without the need to make use of the scheme, they will do so.
Eligibility
To be eligible for the scheme, the business must be UK based and have turnover of no more than £45m per year. The business must also have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender and enable the business to trade out of any short-to-medium term difficulty.
How to access the scheme
To apply for the scheme, you should talk to your bank or one of the 40 accredited finance providers, which can be found on the British Business Bank website here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/
It is important to note that not all providers can offer all types of financing, although the link above can provide more details and clarification.
If you need any help in this matter, do not hesitate to get in contact with us on 0115 955 5500 or email enquiries@pagekirk.co.uk.