Updated as of the 5th of April for new measures announced by the Chancellor

As part of the Covid-19 measures, the Chancellor announced a new Business Loan Interruption scheme for small businesses offered loan of up to £5 million for small and medium enterprises, through the British Business Bank.

Initially these were going to be interest free for 6 months, but this was subsequently updated to 12 months in the week beginning the 23rd of March 2020. The government is also backing 80% of the loan, ie if you can not pay back the loan, instead of the bank being liable for the whole loss, they are only exposed for 20% of the loan value.

Sounds good doesn’t it? To a business who has had to close the doors due to Covid-19 and has no way of generating sales, accessing these loans will make the difference to staying in or out of business.

Unfortunately, the reality of this scheme is quite different to what is being advertised. In case you were wondering, this is what you need to get together to even do a search on these specific loan products. It is worth knowing that lending is a minimum of £25,000.

 

• Last 3 years full accounts with detailed P&L
• Last 12 months business bank statements (Lloyds Bank usually need 6 months personal as well)
• Up to date management accounts
• Aged debtor and creditor lists
• Confirmation of any outstanding debt (provider, term, repayment)
• Statement of personal assets, liabilities, income and expenditure from all Directors (*Note this has been updated and now loans under £250k do not require personal guarantees from Directors)
• For a loan from the main high street banks, you need to answer 11 questions around how Covid-19 has affected the business and what the funds will specifically be used for.
• I would also recommend you prepare a financial forecast based on full post Covid-19 capacity to support your application.

This is why we really do stress working with a professional accountant to ensure it is really the best option for your business before you submit even a search for it.

The interest rates for these Business Interruption Loans as well are higher to because of the risk of default in this current climate. Where as previously you’d be able to get a small business loan for an interest rate of 6 – 8%, you are currently looking at 12 -20% for the same products.

Even with a 12 month interest rate holiday, that becomes a very expensive loan. There are likely to be limits on early repayment period as well so please bear that in mind.

If you have any further questions, please feel free to get in touch.