The Chancellor extended the government’s three coronavirus business interruption loan schemes and the Future Fund on 2 November 2020. The end date of the schemes is now 31 January 2021, ensuring that there is further support in place for those who may need it.
The Chancellor has pledged £330 billion of government backed and guaranteed loans on ‘attractive terms’ for any business that needs cash to pay rent or salaries etc.
This funding is available in four main schemes:
Bounce Back Loans
Bounce Back Loans are a micro loan scheme, providing what the Chancellor claims is a ‘simple, quick, easy solution for those in need of smaller loans’.
Businesses will be able to apply for the Bounce Back Loans for up up 25% of their turnover, up to a maximum of £50,000, with the government providing a 100% guarantee to reduce the friction inherent in the partially guaranteed loans to date. The term on each loan will be six years. There will be no interest, repayments or fees payable for the first 12 months.
There will be no forward-looking tests of business viability or complex eligibility criteria – just a ‘simple, quick, standard form’ for businesses to fill in – although the loans will only be available to businesses that were not in financial difficulty on 31 December 2019.
For most firms, it is claimed that the loans should arrive within 24 hours of approval.
On 2 November 2020, the Bounce Back Loan Scheme was tweaked to allow those businesses that have borrowed less than their maximum to top-up their existing loans.
Coronavirus Business Interruption Loan Scheme (CBILS)
CBILS is being delivered by the British Business Bank and provides loans of up to £5 million. The lending facilities can take the form of:
The repayment terms vary from up to three years (for overdrafts and invoice finance facilities) to six years (for term loans and asset finance).
The loans will now be interest free for the first 12 months and are aimed at small and medium sized businesses (defined as those with turnover of no more than £45 million per annum).
There are a number of eligibility criteria and other requirements. However, these were amended so that the scheme will be available to ‘all viable small businesses affected by COVID-19’ – not just those unable to secure regular commercial financing. In practice, this means that borrowers will no longer have to first try to secure a normal commercial loan elsewhere.
If you are looking for finance under CBILS, the government encourages you to approach your own provider in the first instance – ideally via their website. You may also want to take this opportunity to talk to us, as we can work with you to advise on your eligibility and the most appropriate facility for your business.
If businesses do not have a viable bank lending proposal, then other solutions may be available – please talk to us for more information.
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
The Coronavirus Large Business Interruption Loan Scheme (CLBILS) is designed to support the so-called ‘squeezed middle’ of mid-sized companies that were excluded from the previous lending measures.
CLBILS will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to businesses with an annual turnover of between £45 million and £500 million. CLBILS lending will be offered ‘at commercial rates of interest’.
It is also clear that, for some businesses, this lending may be insufficient to bridge the working capital shortfall resulting from significantly reduced turnover. Restructuring or additional working capital funding may still be required, and businesses will need to constantly review their operations and see where efficiencies can be made.
Covid-19 Corporate Financing Facility (CCFF)
Under the CCFF, the Bank of England will buy short term debt from, primarily, larger companies that can demonstrate they ‘were in sound financial health’ prior to the current crisis. Companies who wish to use the scheme do not need to have issued commercial paper before.
If you want to apply for the CCFF, you will need to contact your bank or finance provider in the first instance to check your business’ eligibility. Once again, you may also want to take this opportunity to talk to us.