The temporary Coronavirus Business Interruption Loan Scheme supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years.
The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
The government will provide lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.
Eligibility
You are eligible for the scheme if:
• your business is UK based, with turnover of no more than £45 million per year
• your business meets the other British Business Bank eligibility criteria
How to access the scheme
The scheme is now open for applications. There are 40 accredited lenders able to offer the scheme, including all the major banks.
To apply, you should talk to your bank or one of the 40 accredited finance providers (not the British Business Bank) as soon as possible, to discuss your business plan.
The full rules of the scheme and the list of accredited lenders are available on the British Business Bank website.
How can Vision Consulting help?
How the Banks are interpreting the criteria is evolving but below are the key details:
• Firstly, we know of several SME’s that have already borrowed from the Banks outside the scheme over the last few days which is designed for Businesses that the lender would like to support but will not do so due to lack of security.
•We have spoken to a number of Banks to discuss interpretation and how they will implement the scheme. In essence the scheme is very similar to the existing Enterprise Finance Guarantee (EFG) scheme. In terms of viability / serviceability the Banks will be looking at performance prior to the Coronavirus crisis to ensure that the debt requested, and any other existing debt can be serviced over the max term of 6 years.
•We would emphasise that the borrower will be liable for the borrowing and the Government guarantee is to the Bank if they cannot recover monies from the borrower. The Banks may seek
personal guarantees from directors / shareholders of limited companies for loans over £250k.
•Up to date financial information including management accounts will be key a key part of the decision making process and some form of cashflow forecasting (varies between Banks)
The most difficult part is evaluating and demonstrating the quantum you need with nobody knowing the likely timescale.
Graham Perrin our Business Planning Consultant (32 years in the Banking industry) is working with us on this. If you need support through the process, please contact him at g.perrin@visionconsulting.co.uk