Coronavirus Business Interruption Loan Scheme
What you need to know
Our Government has pre-announced a ‘Coronavirus Business Interruption Loan Scheme’ scheme specifically to help businesses affected by Covid19.
Full details have yet to be released – launch probably won’t be until April; however it is pretty certain to be operated under the banner of the current EFG, with the same base criteria; those criteria include:
The underlying principle of the current EFG is that it will support businesses which are fundamentally viable, but where the only thing missing is hard security to support it. In this environment the ‘viable’ criteria will have to be relaxed as many applicants will have zero turnover.
An early guess would be that they will look more closely at recent past performance and at the recovery plan. (The latter really should be something applicants are working on for their own benefit).
The 2% ‘guarantee fee’ will be waived. Additionally, we can assume that there will be pressure on banks to reduce their own charges.
There was significant mis-selling on this when the EFG was first launched, not lease by the Government. What you need to know is:
The 80% guarantee is provided by the Government to the lender – not to the borrower. A key condition to a bank claiming against the guarantee is that they must demonstrate that they have made every effort to collect under the PG, short of compromising the family home. In short, this means that the lender will chase you under your PG but won’t charge or repossess your main residence.
As above, the lender isn’t allowed to take charges over your family home. In theory, under the current scheme you won’t be eligible if other security (EG buy-to-let or commercial property) is available.
In reality, I saw that overlooked many times, and suspect it will be waived in this version of the EFG.
The lending will be administered through usual business lending channels, banks, independent and ‘challenger’ lenders.
Contrary to what many say, you do not apply ‘to the Government’.
As with any business lending, you will need to apply directly to your bank, alternative lender or through a trusted broker. Be prepared to provide historic accounting & financial information and a considered recovery plan.
One of the limitations is a cap on the amount any specific funder can lend under the scheme; this means that some lenders will be more accessible than others – shopping around can pay back!
For a confidential discussion on ‘ Coronavirus Business Interruption Loan Scheme’ and to see how we can potentially help you, please give me a call on 01494 422 614 or send an email to firstname.lastname@example.org. Look forward to speaking soon, Mark Jones.