23rd March 2020A Guide to the Coronavirus Business Interruption Loan Scheme

23rd March 2020

The Government announced in the Budget on 11th March 2020 that Small and Medium sized companies (with turnover up to million) would be able to access the “Coronavirus Business Interruption Loan Scheme”, from the week commencing 23 March 2020.

The scheme has seen a number of updates since it was announced, and new material is expected as early as 23 March.

One update we are already aware of is that companies taking out these loans will not need to pay interest for 12 months, rather than the 6 months initially communicated, with a Business Interruption Payment being paid by the Government.

The Scheme will be provided by the British Business Bank through participating providers (see here), and will offer more attractive terms for both businesses applying for new facilities and lenders, with the aim of supporting the continued provision of finance to Small and Medium size UK businesses during the Covid-19 outbreak.

If your Bank does not participate in this scheme then you will be able to apply to one of the participating lenders, albeit these lenders are known to be fast tracking existing clients.

The scheme provides the lender with a government-backed guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. Please note the borrower always remains 100% liable for the debt.

The Government will also cover the first 12 months of interest payments, so businesses will benefit from lower initial repayments. The business remains liable for repayments of the capital. The maximum value of a facility provided under the scheme will be million.

The following finance products will be included:

• Term facilities
• Overdrafts
• Invoice finance facilities
• Asset finance facilities

In order to apply for access to the scheme the company must:

• Be UK based, with turnover of no more than million per annum.
• Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support. Check your eligibility here.
• Be able to confirm that they have not received de minimisState aid beyond equivalent over the current and previous two fiscal years.
• Be unable to meet a lender’s normal lending requirements for a fully commercial loan or other facility but would be considered viable in the longer-term.

Finance terms are from three months up to ten years for term loans and asset finance and up to three years for revolving facilities and invoice finance.

To apply for a CBILS-backed facility, businesses may wish to consider approaching one or more participating lenders to discuss their borrowing needs.

In order to apply for finance the bank will require the following information:

• Management Accounts to 31/01/2020 (or February if available) to include Profit & Loss account, Balance Sheet and Aged Debtor report.
• Narrative (as comprehensive as possible) around the business revenue & cashflow projections (to be provided), analysis of overheads and whether these can be flexed. Your strategy around HMRC payments – i.e. have or will Time to Pay arrangements have been or will be put in place for VAT, PAYE or Corporation Tax.
• Details of any existing loans / HP payments held and whether these asset-backed lenders have / will be approached for capital repayment holidays.
• Last filed Statutory Accounts to include a detailed Profit and Loss.
• Directors remuneration strategy going forward.

It is worth noting that banks appear to be looking favourably on businesses with existing loan facilities and are willing to discuss potential repayment holidays for 12 months, so contacting your bank in the first instance may be the best approach if you have existing loans. Banks will be releasing more information in the coming days/weeks which we will endeavour to communicate to you.

More information can be found here.

On the 2^nd April the chancellor announced a new loan scheme for businesses with an annual turnover of between m and m called Coronavirus Large Business Interruption Loan Scheme (CLBILS). Loans backed by the guarantee will be offered at commercial rate of interest, but the government will not cover interest or fees in the same way as the small business scheme.

Further details of the scheme will be announced later this month.

If you have any questions at all on the above guidance please contact Simon Michaels, CEO of HW Fisher Business Solutions. If you are applying for the loan, Simon can also help prepare management accounts and cash flow forecasts to assist in the application process.

23 March 2020
The information contained in this guidance has been obtained from public sources and every attempt has been made to ensure its accuracy at the date of publication. In this ever changing environment, this information is subject to change and we will not accept liability for losses arising from changes in the law or the interpretation thereof.