When the original COVID-19 reliefs were introduced, we advised clients that we thought it was likely that the government-backed loans would be the hardest measure to access.
That has proven to be the case, but the scheme has now been improved.
To remind you, the idea of the scheme is that lending banks are provided with a guarantee for 80% of lending. This guarantee is between the government and the bank, therefore the borrower is liable for 100% of the debt. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
At first (and to be fair to the banks this was a requirement) small business owners were asked to offer up personal assets for security, with banks leaning wherever possible towards traditional lending rather than the government-backed loans.
However, the following new features have been added to the scheme to make government-backed funds easier for businesses to access:
- Businesses can self-certify they have been impacted by COVID-19
- Banks must not ask for personal guarantees for facilities under £250,000
- Banks can ask for personal guarantees for facilities above £250,000 but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility (the portion not guaranteed by the government)
- CBILS will now support lending to smaller businesses even where a lender considers there to be enough security or where they would already be eligible to borrow on the bank’s commercial terms.
- Some lenders have indicated that they would not charge arrangement fees or early repayment charges
- For loans under £30,000, there are automated processes and a streamlined information portal.
If your cash flow forecasts indicate that you are going to need funding, then the time to apply is now and if you need our help, we will be delighted to assist.