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COVID-19 Information Hub

Coronavirus Business Interruption Loan Scheme

In his announcement on Friday 20 March, the Chancellor significantly extended the government-backed loan guarantee scheme revealed in the Budget to address the cash flow issues faced by businesses. The government will now provide loan guarantees up to “an initial” £330 billion for all sizes of businesses. Please read on for a summary of advised issued by the government and our own supplementary commentary, analysis and guidance.

Updated 25/03/20

Government guidance:

The temporary Coronavirus Business Interruption Loan Scheme supports SMEs with access to loans, overdrafts, invoice finance and asset finance) of up to £5 million in value and for up to 6 years.

The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.

The government will provide lenders with a guarantee of 80% on each loan (subject to a pre-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.

There are 40 accredited lenders able to offer the scheme, including all the major banks.

Eligibility

You are eligible for the scheme if:

your business is UK based, with a turnover of no more than £45 million per year
your business meets the other British Business Bank eligibility criteria

How to access the scheme

The scheme is now open for applications. To apply, you should talk to your bank or one of the 40 accredited finance providers (not the British Business Bank) as soon as possible, to discuss your business plan. You can find out the latest on the best ways to contact them via their websites.

All major banks are offering this scheme. If you have an existing loan with monthly repayments, you may want to ask for a repayment holiday to help with cash flow.

The full rules of the scheme and the list of accredited lenders are available on the British Business Bank website.

Kirk Rice commentary:

This has the potential to be an excellent scheme for those that need it and can gain access. It will kick in where businesses have a sound borrowing proposal but insufficient security under a lender’s normal lending criteria – as a reminder, the scheme provides the lender with a government-backed 80% guarantee potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. The borrower always remains 100% liable for the debt. It is also very important to note that the lenders have been told that if they can offer finance on normal commercial terms without the need to make use of the scheme, they should do so.

The banks now have the details required to administer the scheme, and can issue the application forms on request. It is likely that in this challenging economic environment, banks will be supporting their current clients with the service. Therefore your current provider should be your first point of contact before contacting an alternative lender. If you need assistance identifying a lender, please let us know or visit www.british-business-bank.co.uk and view the detailed pages on the Coronavirus Business Interruption Loan Scheme to find accredited lenders.

A more detailed recap of the main features:

  • Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.
  • 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.
  • No guarantee fee for SMEs to access the scheme: No fee for smaller businesses. Lenders will pay a fee to access the scheme.
  • Interest and fees paid by the government for 12 months: The government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
  • Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
  • Security: At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
  • The borrower always remains 100% liable for the debt. (The point of the scheme is to help banks place funding as fast as possible with the minimum requirements).

And a little more detail on eligibility, to qualify your business must:

  • Be UK based, with a turnover of no more than £45 million per annum
  • Operate within an eligible industrial sector **
  • Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years
  • Have a sound borrowing proposal, but insufficient security to meet the lender’s normal requirements i.e. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

As this remains, to all intents and purposes, a standard business loan, the lenders will still undoubtedly wish to see the normal evidence to allow them to make a commercial lending decision and will need to establish that your business remains viable. Remember, this is a loan, not a hand-out and unstructured requests are unlikely to be fruitful. From recent experience, you should be expected to provide information to include any/all of:

  • A summary of current business profile, e.g. current operating and contingency plans, works in progress, ability to trade, customer and supplier ability, etc. – half-page, bullet points
  • Latest Management Accounts including Profit and Loss and Balance Sheet, an Aged Debtors and Creditors summary
  • Six month Cashflow including detail of assumptions made
  • Review of request – e.g. Loan CRH 6 Months, £X Overdraft facility, £X Loan
  • Ask each Director / Member / Owner to complete and return a Consent to Credit Form

As ever, please ask us for help if you are considering this. We can often offer insight as to what might help the lender reach a positive decision, and make the provision of the required information a more straightforward process. Keep in mind that a major part of this process is convincing a decision-maker to lend you money, so a professional and articulate request that addresses the risks presented by the current climate will be helpful. That decision-maker will be going through the same pressures and changing circumstances as you – so whilst all lenders will undoubtedly deal with all requests in a professional and commercial manner, empathetic communications and provision of information in a speedy manner will be invaluable.

Do also consider other forms of finance, such as repayment holidays, asset finance, overdrafts – what most businesses need now is help with cashflow, so speak with us about other ways of freeing up cash.

We’ll be updating this page for the answers as and when they become available, so please, do check back regularly for further information.

** The following trades and organisations are not eligible to apply: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); The public sector including state-funded primary and secondary schools; Employer, professional, religious or political membership organisation or trade unions.

Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.

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