The UK Government is backing a series of loan schemes designed to support businesses during the pandemic. This summary will help you understand which scheme is most suited for your business, and what you need to consider before applying.
As well as supporting innovative businesses through the new Future Fund (which you can read more about here), the UK Government has introduced three loan schemes designed to help SMEs, smaller businesses, and larger businesses.
On 23 March 2020, the British Business Bank rolled out a temporary loan scheme for UK-based SMEs, who would otherwise struggle to access traditional bank lending and overdrafts. The premise of the scheme is that the government provides participating lenders with a government backed partial guarantee for 80% of the amount borrowed.
Provided you meet the eligibility criteria, you can apply to a loan of up to £5 million for a term of up to 6 years (reduced to 3 years in the case of overdrafts and invoice finance facilities). For loans above £250k, security, including personal guarantees, may be required at the lender’s discretion.
BBLS lenders are given a government backed guarantee of 100% to offer loans of up to £50,000 to businesses based in the UK, which are losing revenue as a result of the Covid-19 pandemic. The BBLS Scheme is initially open until 4 November 2020.
Provided you meet the eligibility criteria, you can apply to borrow from £2,000 to £50,000, up to 25% of turnover, and for a term of up to 6 years. The loan is interest-free for the first 12 months, after which you would be required to pay interest at 2.5% per year.
This scheme enables large businesses to borrow up to 25% of their annual turnover, but no more than double their annual wage bill for the most recent year available, up to a maximum of £200 million. Loans may be available from 3 months up to 3 years.
If you are thinking of applying for a CLBILS loan, remember that there are restrictions on this loan:
If you satisfy the eligibility requirements of one or several of these schemes, you must apply via the website of a participating lender (you can find them listed here). The lender is likely to first consider whether to grant you the finance on their normal commercial terms. If they can’t, they will then consider funding you under the relevant Government-backed scheme.
All loans are fully repayable by the borrower, and ultimately, the lender makes the decision. You should therefore not assume that a loan will automatically be available to your business just because you meet the set criteria, you also need to satisfy the lender’s internal requirements. The documentation for the schemes will generally be on standardised terms, and cannot be negotiated. If a lender declines your application, you can apply to another participating lender.
No new security will be taken but a lender can rely on their existing security from previous lending. For a CLBILS loan, any lending above £250k is likely to require a personal guarantee from a director. No security will be taken over the director’s home, but as ever with personal guarantees, personal assets may be put at risk.
From a practical perspective, you should first look at your existing arrangements and be speak to your existing lenders to work out what is available. For instance:
Remember that during the crisis, banks and other telephone services will be busy, and lenders have limited capacity to handle enquires because of social distancing. To assess whether your business is eligible, they will require you to submit information, financial and other, so it is worth having this ready before applying.
You can find details of other government measures to support public services, people and businesses through this disruption on the Government’s Business Support website
For more information on the CBIL, CLBIL and BBL schemes and to make an application under these schemes please visit www.british-business-bank.co.uk