Applications can now be made for the Coronavirus business interruption loan scheme. Access to the loans is through a number of accredited lenders listed on the British Business Bank’s website. Accredited lenders can provide a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities.
As can be seen, not all lenders are accredited but we know that additional lenders will be seeking accreditation and that such accreditations are being fast tracked.
If you are thinking about applying for a loan, and you are with an accredited lender, then you should approach your existing relationship manager. If your lender is not on the list, we recommend that you speak to your lender in the first instance who should be in a position to advise. Many of the accredited lenders are relatively small and are therefore unlikely to be in a position to lend to new borrowers. We are trying to gauge the interest of the bigger banks in lending to new customers under the scheme.
At this stage we know that lenders are getting up to speed with the scheme so initially you may find the response vague.
It’s important to note that the scheme provides the lender with a government-backed guarantee, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. The scheme may therefore enable you to raise additional repayable debt from an accredited lender but it’s the lender’s decision to lend and the government is only going to underwrite 80% of the risk. You can therefore expect the accredited lender to want to go through a proper credit process and that will require detailed information from you including financial information both historic and forecast.
The key highlights of the scheme are:
- The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.
- The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance.
- The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees so businesses will benefit from no interest costs and lower initial repayments
- 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.
- 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 the scheme.
- 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.
Smaller businesses from most economic sectors can apply for the full amount of the facility. To be eligible for a facility an SME must:
- Be UK based in its business activity, with turnover of no more than £45m per year
- Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.
If you are considering accessing this scheme, feel free to speak with any member of the Corporate Finance team by clicking here.