We consider the Chancellor's recent intervention to help the Scheme help others.
What Are the Main Changes?
- The current onerous eligibility criteria will be softened. Lenders should no longer consider whether other lending options will be more appropriate which in turn extends the number who benefit.
- Lenders can no longer request a personal guarantee for loans of up to £250,000. It is expected that this measure will take retrospective effect in respect of loans approved under the Scheme to date.
- Applications are to be processed at a much faster pace to help businesses survive during this critical time.
What Potential Limitations Remain in Place?
- Firms will still have to demonstrate that they are 'creditworthy' and that they are not just another failing business.
- The government has not capped the rate of interest lenders can charge under the Scheme. Once the 12 month holiday period expires, small firms may struggle to meet high interest rates, which some reports state, it could reach as high as 35%.
- Lenders can still request a personal guarantee for loans over £250,000. However, this is to be limited to the 20% not covered by the government backed guarantee to be relied upon after the proceeds of any business assets have been applied.
- Firms remain 100% liable for the debts under the Scheme.
What Should You Do Now?
- Approach your existing lender if it is one of the accredited lenders. This should hopefully speed up part of the process if the lender is already in possession of your firm's 'know your client' information and initial business projections.
- Approach another accredited lender if you are not approved by your existing lender.
- Get in touch with one of our team members, should you want to explore any alternative products or options offered to you.
If you require specialist legal advice on the Business Interruption Loan Scheme, please contact Zeena Asghar in our Corporate Law team on 07795 802 268, or complete the form below.