Help for businesses

At Budget 2020 on Wednesday 11 March, the Chancellor announced a ‘Coronavirus Business Interruption Loan Scheme’, and that it would become available ‘over the coming weeks’.

The new scheme will become available in week commencing 23 March 2020.

The scheme provides the lender with a government-backed guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.

The Government will also cover the first 6 months of interest payments, so businesses will benefit from lower initial repayments. The business remains liable for repayments of the capital. The maximum value of a facility provided under the scheme will be £5 million pounds (the original announcement suggested a maximum value of £1.2 million.)

Support is available if the business is;

• UK based, with turnover of no more than £41 million per annum

 

• Operates within an eligible industrial sector – this includes the motor industry

 

• Able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years

 

• Has a sound borrowing proposal, but insufficient security to meet the lender’s requirements

Finance terms are from three months up to ten years for term loans and asset finance and up to three years for revolving facilities and invoice finance.

ASE Comment

There are three obvious things to reflect upon other than to generally approve of the initiative.

1. The business must have a sound business proposal and have insufficient security to meet the lenders’ requirement, but does this not offer problems as well as solutions;

 

• What is a sound business proposal?

 

• How does a lender judge security in the current conditions?

 

2. It’s a LOAN; the borrower always remains 100% liable for the debt.

 

3. How does this interact with the requirement to settle PAYE, VAT and other taxation liabilities?

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