25 September 2020
With the threat of a second wave of the COVID-19 pandemic spreading across the UK, your business may be under significant financial pressure.
A range of loan schemes are currently available to support you if you're experiencing lost or deferred revenues leading to disruptions in cashflow (latest guidance available here), however, many of these schemes are due to end in the coming weeks.
Fortunately, Chancellor of the Exchequer Rishi Sunak recently announced plans to extend several existing schemes – we outline how these could benefit your business below.
The deadline for your business to apply for loans under the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund has been extended to 30 November 2020.
This will ensure that if you're yet to access the loan schemes, you can do so in the coming months – which is particularly helpful, considering the likely impact of the government's newly introduced societal restrictions. The end date for the COVID Corporate Financing Facility remains 22 March 2021.
The UK government has also announced extensions to the Bounce Back Loan Scheme. The scheme allows your business to borrow between £2,000 and £50,000 through a standardised online application, with the loans being 100% guaranteed by the UK government. The UK government pays all fees and interest for the first 12 months, and you will not be required to make any repayments during the first 12 months.
Initially, loans under the scheme were for a maximum term of six years; this has been extended to 10 years, to reduce the required monthly repayments your business would need to make after the first 12 months. If you've already borrowed a Bounce Back Loan, you'll be able to apply to extend the term of the loan to 10 years.
To offer greater flexibility to businesses that have borrowed a Bounce Back Loan, there will now be options for businesses to request payment holidays. If you're a borrower, you'll be able to request to only pay interest on your loan (and no repayment of principal) for a six-month period, which your business will be able to do three times during the term of the loan.
You'll be able to request a full six-month payment holiday for both interest and repayment of principal once during the term of the loan. That said, you'll only be able to request a payment holiday if your business has already made six repayments of principal.
The Chancellor has indicated this latter option is intended for businesses "in trouble", but it's unclear whether there will be any additional criteria for your business to suspend making all payments under a loan for six months.
Finally, the maximum term of CBILS loans has been extended from six years to 10 years. Unlike with the Bounce Back Loan Scheme, your business will need to request a CBILS loan directly from an accredited lender.
While the UK government has agreed to extend the term of its 80% guarantee it provides accredited lenders, it will be up to an individual lender to agree to a 10-year loan term. Therefore, if you've already borrowed a CBILS loan, it may be difficult to extend the term of that loan, given that lenders will need to undertake a credit appraisal to do so.
Looking ahead, the Chancellor has confirmed that the UK government is developing a new guaranteed loan scheme that will launch in January 2021, once the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund have ended. No details of this scheme have been announced yet, but we'll update you once information on the scheme has been published.
We'll continue to monitor this situation and update you on any new developments relating to these and other schemes. To discuss any of the issues raised in this article, please contact a member of our team.