The UK government and British banks have come together to help businesses overcome the financial ramifications of COVID-19.
The Business Interruption Loan Scheme was launched on 23rd March 2020 for a period of 6 months offering businesses up to £5 million that have been heavily affected by the coronavirus pandemic.
The desired outcome is to save those businesses that may go under as a result – and safeguard the income of millions of staff and potential unemployment.
As part of the scheme, 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, giving the lender peace of mind, but the borrower will still be obligated to repay in full.
What are the features of the business interruption loans?
- 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
Who can benefit from a business interruption loan?
Any business that has had major financial losses or could potentially have major losses as a result of the COVID19 crisis can apply – especially if they risk going into liquidation.
Millions of businesses in the UK have been affected so far, particularly in hospitality, events and travel, although this extends to all businesses across the country.
You may wish to apply for a business interruption loan to stay on top of your finances and expenses, to cover things like:
- Staff costs
- Contractual obligations
- Outstanding debt
- Legal costs
- Accounting costs
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. See the full list of lenders here.
To apply, you must submit an application directly with the lender (or your current bank), 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 requirement 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. Read here for more information on how to apply.
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 may strengthen your application since it shows that you can be cash positive and potentially more likely to repay your loan.
In addition, any valuable assets or security in the form of inventory, future invoices or property (not your primary residence), can boost your eligibility since it means that lender could recover their debts if need be.