Covid-19 has had an unprecedented effect on the global economy, and the government has announced a raft of measures to assist businesses and their employees in an attempt to get the nation through this pandemic.

One of the measures announced, and recently clarified, is the Business Interruption Loan Scheme (BILS) designed to support Small and Medium sized Enterprises (SMEs) by providing access to a variety of different types of lending facilities including loans, overdrafts, invoice financing and asset financing of up to £5 million and for up to a period of 3 to 6 years.

The government will cover interest payments of these loans for the first 12 months, together with any lender fees so that there will be no upfront costs for a borrower and lower repayment costs in the first 12 months.  The government will also back 80% of the value of these loans by way of guarantee. These loans will be provided by 40 accredited lenders across the UK including your typical mainstream banks and other finance providers.

Conditions

There are a number of conditions that any applicant must consider, including:

• The loan must be for business purposes
• Your company must be based in the UK
• Your business turnover cannot exceed £45m (applies to a group turnover)
• You must have been adversely affected by the Covid-19 pandemic
• Your business must generate more than 50% of its turnover from trading
• Your loan will be used to back trading in the UK
• Your loan must be for no more than £5m for up to a 6 year

The loan is not sector specific (although banks, insurers, public bodies and various educational bodies do not qualify) so any businesses satisfying the criteria can apply.

What do you need to do?

You should apply to an accredited lender and the lender will check your affordability to repay the loan and this will be supported by you providing information including historic accounts, management accounts, cash flow forecasts, a business plan and an asset list. This is not an exhaustive list (and will vary from lender to lender) and not having all of these documents will not automatically preclude you from applying for a loan but will certainly help expedite the process. If you are applying to your existing lender, you may not need to provide all of this information.

If you have previously applied for a loan under the BILS scheme, the criteria has recently been widened and so applicants that have previously been unsuccessful due to cash flow difficulties may now qualify and should consider re-applying.

When considering applying for any new finance, you must consider any existing obligations you are currently under, including likely restrictions on applying for further funding, to avoid breaching the conditions of your existing loans.

Personal Guarantees

Personal guarantees were a cause for concern and clarification has now been provided in that lenders will not require personal guarantees for loans up to £250,000. However, for facilities above £250,000, a lender may still require a guarantee but this will be restricted so as to exclude an individual’s main place of residence and the guarantee will be capped at a maximum of 20% of the outstanding balance of the loan after the proceeds of business assets have been applied.

Personal guarantees will require an individual to take independent legal advice and Ansons are able to provide such advice at short notice. Please call 01543 466660 for further information.

Large Business Interruption Loan Scheme

There will be loans of up £25m made available for business with a turnover in excess of £45m but not more than £500m and there will be a similar government backing of 80% of these loans. It is expected such loans will be provided at commercial rates.

If you would like to discuss any financing or re-financing options, the Ansons’ corporate team can assist. For further information please contact Neil Jones on 01543 431184 or email njones@ansons.law

Alternatively, if you would to speak to Ansons about any other business needs whether Covid-19 related or not, Ansons can fully support your business needs including employment, property, business disputes or debt collection related issues. Please visit our website www.ansons.law for full details or call 01543 466660.