Coronavirus Business Interruption Loan Scheme
If you are not eligible for one of the grants, and / or if you need more financial support to keep your business afloat, then you need to consider borrowing money in order to meet your liabilities. The government doesn’t want businesses to go under, and the Coronavirus Business Interruption Loan Scheme is designed to stop that from happening.
The theory is that you should be able to access loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years. The government is providing lenders with a guarantee of 80% on each loan. The loans should be interest free for the first 12 months.
There are currently 40 accredited lenders who are able to offer the scheme. This includes all of the major high street banks.
So far many businesses have struggled to access this scheme, so the Chancellor has now made some changes to the scheme to make it easier.
- The loan guarantee has been extended to all viable small and medium businesses, and not just businesses who couldn’t access a loan on commercial terms
- Banks have been banned from asking for personal guarantees on loans of £250,000 or less
- There is also now a scheme for larger businesses with turnover of more than £45 million
You are likely to be best to approach your existing bank first, as we have heard that banks are prioritising their existing customers.
Who can apply
Businesses must:
- Be UK based
- Have an annual turnover of no more than £45 million
- Have a borrowing proposal that the lender would consider viable, were it not for coronavirus
- Self-certify that the business has been adversely impacted by the coronavirus
What information do you need to provide
You need to have a thorough borrowing proposal to maximise your chances of accessing a loan. This can be quite hard to pull together as a small business owner if you have never had to apply for a loan before.
Firstly make sure you understand exactly what you are asking for:
- How much money do you need to borrow
- What will the money be used for (paying suppliers, rent, salaries?)
- What period do you intend to make the repayments over
The lender will need to check if you have a suitable business purpose for the money, and that the repayments are affordable.
They will likely ask you to provide evidence that the repayments are affordable. The British Business Bank says that this is likely to include:
- Management accounts
- Cash flow forecast
- Business plan
- Historic accounts
- Details of assets
We are doing what we can to support our clients in pulling together this information. We have a free cashflow template that you can use. If you are not already using cloud accounting software then we would recommend looking at moving onto Xero. There are several add-on apps in the Xero eco system that would help with pulling together management accounts and cash flow forecasts relatively quickly.
Additional guidance
If helpful you can access the full guidance from the British Business Bank.
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If you need help pulling together a cash flow forecast, management accounts, or other financial information then we may able to offer assistance, click here if you would like more information.