IMPORTANT UPDATE 20th March 2020:
At ‘The Budget 2020’, the Chancellor announced that a ‘Coronavirus Business Interruption Loan Scheme’ (CBILS) will temporarily replace the Enterprise Finance Guarantee (EFG), becoming available over the coming weeks.
Today, 17th March 2020, the Chancellor has announced an extension of the financial support that the Government is offering to businesses and individuals.
Of these new measures, the most applicable for SMEs include:
Extension of the Coronavirus Business Interruption Loan Scheme (CBILS) from £1.2m per business to £5.0m per business.
“Time for banks to repay the favour to taxpayers”
Updated 1st April 2020 – Business secretary Alok Sharma says it would be “completely unacceptable” if banks were refusing to help good businesses facing financial difficulty due to coronavirus.
Mr Sharma referred to the the support financial institutions received from the taxpayer following the 2008 financial crisis.
Updated – These loans will be guaranteed by the Government and will require no interest payments for the first 12 months. In combination with a larger business scheme, a total of £330bn of guarantees will be available with more liquidity to be provided if required.
There was no mention of the guarantee level increasing above the 80% level previously announced.
Updated – Boris Johnson has ordered cafes, pubs, bars, nightclubs, leisure centres,restaurants and gyms to close from tonight in a bid to stop the spread of coronavirus. Venues will count as an event for the purposes of insurance claims to be made by these businesses.
A rates holiday for all businesses in the leisure, hospitality and retail sectors of 12 months with cash grants of £25,000 per business for those with a rateable value of less than £51,000.
Updated – Government grants will cover 80% of the salary of retained workers up to a total of £2,500 a month – that’s just above the median income.
Updated – Chancellor has announced he will defer the next quarter of VAT payments for businesses until the end of June, in a £30bn injection into the economy.
Cash grants of £3,000 for small business that pay business rates of less that £12,000 announced in Wednesday’s budget will be increased to £10,000 per business.
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS) – TEMPORARILY REPLACING THE ENTERPRISE FINANCE GUARANTEE SCHEME
It will operate in a similar way to EFG and be provided by the British Business Bank, but will offer more attractive terms for both businesses and lenders, with the aim of supporting the continued provision of finance to UK businesses during the COVID-19 outbreak.
As well as loans, there are many other types of finance supported by the programme, depending on the provider.
The British Business Bank’s CBILS facilitates business finance to smaller businesses that are viable but unable to obtain finance due to having insufficient security to meet the lender’s normal requirements.
The borrower always remains 100% liable for the debt.
In this situation, CBILS provides the lender with a government-backed 80% guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS) – EFG, Enterprise Finance Guarantee with Loan Finance
STOP PRESS – 26th March 2020
The government has chided banks for requiring borrowers to provide personal guarantees in order to access new emergency loans backed by the state with Downing Street declaring that no lender was allowed to “take a guarantee against the borrower’s home … We will take all action necessary to ensure that the benefits of the measures are passed on.” But one banker said, “the scheme design obliges us to follow normal credit procedures. They need to rethink it.” Yesterday, 26th March 2020 Barclays, Royal Bank of Scotland, Lloyds Banking Group, Metro Bank, Virgin Money and HSBC said they would not ask customers for personal guarantees on loans up to £250,000, but larger loans could require security which may include personal guarantees. Meanwhile, the Chancellor has promised a “workaround” for businesses too small to have an investment grade rating and too big to qualify for the SME – focused scheme.
It allows businesses with a turnover of up to £25 million to apply for loans between £1,000 and £5 million to support new loans, refinance existing loans or to convert all or part of an existing overdraft into a loan that is repayable over a period of up to 10 years to meet the business’ working capital demands.
THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS) – TEMPORARILY REPLACING The Enterprise Finance Guarantee Scheme (EFG) can also provide a top-up guarantee on invoice finance facilities to support the advance that was agreed with the Lender.
- For incorporated entities: Available for sums of £10,000 to £5,000,000.
- For sole traders and partnerships: Available for sums of £25,001 to £5,000,000.
- Businesses in most sectors are eligible to apply for the CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS) – TEMPORARILY REPLACING THE ENTERPRISE FINANCE GUARANTEE SCHEME (EFG)
- Supplied through a lender, the government initiative guarantees 80% of the loan to lower the risk to the lender, increasing the likelihood of lending through the CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS) – TEMPORARILY REPLACING THE ENTERPRISE FINANCE GUARANTEE SCHEME (EFG)
- The CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS) – TEMPORARILY REPLACING THE ENTERPRISE FINANCE GUARANTEE SCHEME (EFG) can be provided alongside other funding solutions such as an invoice finance facility.
Typically,you will need to provide all the information normally required by a lender in connection with a loan application, which will generally include the following supporting information:
- a current business plan, including details of the purpose for which the loan is required and details of other investment in and financial commitments of the business;
- financial projections;
- historic trading figures;
- statutory and management accounts;
- Information on any other publicly funded support received by your business within the past three years.
Additional British Business Bank Scheme Criteria
For facilities with a proposed maturity after 31 December 2020, the facility amount should not exceed:
(a) twice the annual wage bill of the beneficiary (including social charges as well as the cost of personnel working on the undertakings site but formally in the payroll of subcontractors) for 2019, or for the last year available. In the case of undertakings created on or after 1 January 2019, the maximum loan must not exceed the estimated annual wage bill for the first two years in operation;
(b) 25% of total turnover of the beneficiary in 2019;
(c) with appropriate justification and based on a self-certification by the Applicants of its liquidity needs, the liquidity needs of the Applicant from the moment of granting for the coming 18 months. The Applicant’s liquidity plan may include both working capital and investment costs.
To find out more about the CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME – TEMPORARILY REPLACING THE ENTERPRISE FINANCE GUARANTEE SCHEME (EFG)
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