What Is the Scheme About?
- The new Scheme will be delivered by the British Business Bank through over 40 accredited lenders to support primarily small and medium-sized businesses (SMEs) to access banking facilities in circumstances where they would typically be refused.
- The Scheme supports a range of business finance products such as:
- Term facilities
- Asset finance facilities up to a term of six years
- Invoice finance facilities up to a term of 3 years
- Loans of up to £5 million for SMEs are available (with the full amount repayable over six years).
- The government will provide lenders with a guarantee of 80% on each loan (subject to an overall cap by the lender) to give lenders further confidence in continuing to provide finance to SMEs.
- The government will not charge businesses or banks for this guarantee.
- Businesses will benefit from the first 12 months of that finance interest free as the government will cover the first 12 months of interest payments and any lender-levied fees. Therefore, smaller businesses will benefit from no upfront costs and lower initial repayments.
Note that the borrower is always 100% liable for repayment of the facility supported by the Scheme.
How Long Will the Scheme Run for?
At this stage the initial period is 6 months.
How Does My Business Qualify for the Scheme?
Generally, your business must:
- be based in the UK, with turnover of no more than £45 million per annum; and
- have a sound borrowing proposal which, were it not for the current coronavirus crisis, would be considered viable by the lender, and for which the lender believes the provision of a facility under the Scheme will enable the business to trade out of any short-to-medium term difficulty
Do I Need to Grant Security for Any Facility under the Scheme?
Not necessarily. The lender will use its discretion to proceed without security for any unsecured lending for facilities of £250,000 and under. The lender will also assess any prior facilities provided to the business in the absence of security for anything above £250,000.
Anecdotally, we note there are instances where some borrowers are facing difficulties with certain lenders where prior ranking security includes a negative pledge.
Are There Any Businesses That Do Not Qualify?
At this stage, the following trades and organisations are not eligible to apply:
- banks and building societies
- insurers and reinsurers (but not insurance brokers);
- the public sector including state funded primary and secondary schools
- employer, professional, religious or political membership organisation or trade unions
Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment referred to above.
How Do I Proceed if I Am Interested in Applying for the Scheme?
- You should consider approaching one or more the participating accredited lenders to discuss your borrowing needs and business plan with them.
- Speak to us if you need guidance in contacting a lender or require assistance with the process or documents provided once you have liaised with the lender.
- We may also be able to assist with any existing loan arrangements and liaising with those lenders regarding potential relief or options to help with cash flow.
If this is something that may help, do not delay as we have received reports that accredited lenders have been inundated with enquiries. Therefore, the sooner you make enquiries the better. Please use the form below to get in touch with our Corporate Law team.