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Revamp of Government Coronavirus Loan

The Government has revamped the Business Interruption Loan scheme to make it more attractive to business owners.

We wanted to let you know that the Coronavirus Business Interruption Loan (CBIL) Scheme has been revamped after it has come under considerable and deserved criticism. The Institute of Financial Accountants reported on 3 April that £90M of loans had been approved for SME’s and £1.9B of loans had been approved for larger companies and a further £1.6B had been committed. This total of just over £3.5B represents 1.2% of the £330B pledged by the Government. Perhaps a worrying indication of the initial naivety of the Government and might we suggest lack of experience from the cabinet, was to think that businesses would simply borrow and borrow their way through the crisis, where they have little or no turnover.

The headlines of the revamp to the rules are:

1. The loans are available to businesses whether or not they have not been refused a commercial loan.
2. The lenders have authority to decide whether or not to offer finance. If one lender turns you down, you can still apply to the others.
3. The interest rate of the loan after the 1st 12 months interest free have come down from some of the ridiculously high rates we had seen quoted. However, there is still no cap on interest rates from the banks for these loans. That is something we would expect the Chancellor to step in with more instruction on.
4. For loans up to £250,000, business owners will not have to supply personal guarantees. For loans of over £250k any personal guarantee must exclude recourse to your home and are effectively limited to 20% of the outstanding balance.
If you are thinking of accessing the CBIL scheme or a commercial loan scheme or any other type of borrowing, please get in touch as we can help you through the process.

As with any kind of bank borrowing, you will need:

• Your books fully up-to-date
• Up-to-date management accounts
• Projections and forecasts for the business

One of the big positives from the revamp is that the guarantee and security guidelines have been updated by the British Business Bank. Nobody wants to think about their business going down, but if the worst comes to the worst you are protected by the scheme.

Get in touch with alan@fyfemoirassociates.com or graham@fyfemoirassociates.com should you require our assistance.