The COVID-19 outbreak has had a huge impact to businesses across the UK, large and small. Figures show that the impact to companies and unemployment is greater than the economic recession of 2008.
To respond to this, the UK government launched The Business Interruption Loan Scheme on 23rd March 2020 for a period of 6 months, to offer up to £5 million to businesses that have been heavily affected by the coronavirus pandemic.
The Government will cover up to 12 months of interest payments for businesses to help their initial cash flow. From a lender’s perspective, the Government will guarantee 80% of the value of the loan and this is for the lender only, since the borrower will still be obligated to repay in full.
What are the features of the business interruption loans?
The main features of the business interruption loans include:
- Borrow up to £5 million
- Borrow up to £250,000 unsecured
- Borrow over £250,000 will require security
- Cannot use your primary resident as security
- Loans and asset finance up to 6 years
- Overdrafts and invoice finance up to 3 years
How can I apply?
The UK government has partnered with a number of finance companies to offer business interruption loans. This includes almost all of the main banks in the UK, challenger banks such as Aldermore and mainstream lenders such as Hitachi Capital.
To apply, you must submit an application directly with the lender, who will be offering a business interruption loan, which will be different a regular business or personal loan they offer.
Every lender will have their own eligibility and criteria, although a main feature is that you must demonstrate that your business has suffered directly as a result of coronavirus and not before. If you think it may impact your business long-term, this is something that you can also mention when you apply.
Who can benefit from a business interruption loan?
Any business that has had major financial losses or could have major losses as a result of the COVID19 crisis can apply ? especially if they risk going into liquidation.
There are a number of businesses that have been impacted across hospitality, events and travel, but also general businesses. You may wish to apply for a business interruption loan to stay on top of your finances and expenses, particularly to cover things like:
- Staff costs
- Rent
- Contractual obligations
- Outstanding debt
- Licensing
- Legal costs
- Accounting costs
Am I eligible?
Every bank and lender will have a different criterion for the business interruption loans that they offer, however, a main requirement is that your business has been impacted by the recent crisis.
Other eligibility requirements include having a limited company in the UK (usually for a minimum of two years) and have an annual turnover of less than £45 million.
Having a profitable business can always help by giving confidence to the lender that you will be able to repay on time.
In addition, any valuable assets or security in the form of inventory, future invoices or property (not your primary residence), can strengthen your application since it means that lender could recover their debts if need be.
