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Access to Coronavirus Business Interruption Loan Scheme

To support lending to small businesses the government announced the temporary Coronavirus Business Interruption Loan Scheme as part of £330 billion of guaranteed loans for businesses.  The British Business Bank will deliver the scheme through participating lenders.

The Coronavirus Business Interruption Loan Scheme is a government measure to encourage finance providers to continue lending to small businesses throughout the coronavirus crisis.

The chancellor, Rishi Sunak, described the enhanced loan guarantee scheme as making cash available for businesses to pay rent, salaries and suppliers and to purchase stock.

A separate Coronavirus Large Business Interruption Loan Scheme (CLBILS) has also been announced which will offer loans of up to £25m to firms with an annual turnover of between £45m and £500m.  Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced later this month. The rest of this note focusses on Coronavirus Business Interruption Loan Scheme and not CLBILS. 

How it works

The government offers a guarantee of 80% on each loan to give lenders confidence to provide finance to small businesses.  The scheme replaces the Enterprise Finance Guarantee Scheme which was set up to encourage lending to smaller businesses unable to obtain finance due to having insufficient security to meet a lender’s normal requirements.

The lending is provided by over 40 accredited lenders.  There are several accredited lenders operating in Northern Ireland, including high-street banks. There are also plans to expand the list of accredited lenders.

The borrower always remains 100% liable for the debt.  The government-backed guarantee (which is subject to an overall cap) benefits the lender.

What is on offer

Loans of up to £5 million will be available, with no interest due for the first 12 months. In addition, no fees will be charged for smaller businesses to access the scheme and certain fees such as arrangement fees will be covered by the government.

The finance available through the scheme is attractive as it is being made available with no upfront costs and lower initial repayments.  The finance can take the form of term facilities, overdrafts, invoice finance facilities and asset finance facilities.

What businesses will qualify

Most small businesses will be able to qualify under the scheme provided that:

·       the business is UK based;

·       the business' turnover is under £45 million per annum; and

·       A business can demonstrate a borrowing proposal that would be considered viable, if not for the current pandemic. In addition, the lender must be satisfied that the finance requested will allow the business to trade out of any short to medium term difficulties.

What should business owners do next

Business owners are advised to focus on resilience and business-continuity planning.  As part of this, financing needs should be reviewed; business plans revisited; and financial forecasts updated.  Lenders are encouraging customers and potential borrowers to discuss their funding needs with their relationship manager at the earliest opportunity.

To apply for a facility supported by the Coronavirus Business Interruption Loan Scheme, businesses should consider approaching one (or more) of the accredited lenders to discuss their borrowing needs. There are significant resources being mobilised to meet demand. An application for finance under the Coronavirus Business Interruption Loan Scheme shouldn’t take any longer than any standard application for finance.

WE CAN HELP

Having the right legal advice at the right time is crucial. Our expert team offers clear, concise and problem-solving legal advice aimed at accessing finance quickly and effectively.

Please do not hesitate to get in touch with Naomi Gaston in our banking team (details below) or your normal Mills Selig contact to discuss.

Naomi Gaston
Senior Associate

Mills Selig
21 Arthur Street
Belfast, BT1 4GA
Northern Ireland

T: +44 (0) 28 9024 3878
E: naomi.gaston@millsselig.com

3 April 2020

Speak to us on +44 (0)28 9024 3878