19 June 2020

Government-Backed Loan Schemes

As we move into a period where restrictions are eased and businesses and workplaces are reopening, and furloughing will start coming down, many business owners and their employees will be navigating the challenges of returning to work and the business decisions and costs that go alongside that. We have set out, below, a summary of the government-backed loan schemes available to businesses to support industry as we collectively work towards a "new normal".

Page last updated: 5 August 2020

The content on this page has been updated since initial publication to reflect changes to the rules and guidance in this rapidly evolving situation.

Download our PDF outlining the most up-to-date information on Government-Backed Loan Schemes

SMEs

Scheme Name Synopsis Eligibility Notes and Exceptions
Coronavirus Business Interruption Loan Scheme (CBILS)
  • A CBILS facility may be up to £5 million and can take the form of term loans, overdrafts, invoice financing or asset financing.
  • It must be used for a business purpose and the business must have been adversely impacted by COVID-19 (for example, a significant reduction in cashflow as a result of the virus).
  • Primary intention is to support trading in the UK and so the business must generate more than 50% of turnover from trading.
  • The CBILS facility will be up to six years for term facilities and up to three years for other forms of facilities.
  • The government guarantees 80% of the finance to the lender and pays the interest and any fees for the first 12 months.

The business must:

  • be based in the UK;
  • have an annual turnover of up to £45 million;
  • be able to show that it would be viable were it not for the pandemic;
  • be able to show that it has been adversely impacted by the coronavirus; and
  • confirm, if it wishes to borrow £30,000 or more, that it was not classed as a business in difficulty on 31 December 2019.
  • Effective from 30 July 2020, businesses classed as "undertakings in difficulty" prior to 31 December 2019 are able to apply for a loan under the scheme – for further information see Banking and Finance Associate, Simona Cavasio's article here.
  • Over 50 accredited lenders associated with the scheme Certain businesses are not able to apply including banks, building societies, insurers, public-sector bodies and statefunded primary and secondary schools.
  • It is possible to apply to another lender if one lender declines to lend.
Future Fund
  • This scheme is available and open for applications until the end of September 2020.
  • Convertible loan notes from between £125,000 to £5 million.
  • Open to innovative companies facing financial difficulties due to COVID-19.
  • Private investors must at least equal or match the funding.
  • Intended to cover those companies who rely on equity investment and unable to access CBILS.

The business must:

  • be based in the UK
  • have previously raised at least £250,000 in equity investment from third-party investors in the last five years
  • secure matched funding from third-party private investors or institutions
  • have none of its shares traded on a regulated market, multilateral trading facility or other listing venue
  • have been incorporated on or before 31 December 2019
  • show at least one of thefollowing is true:
    • half or more employees are UK based
    • half or more reve
If the business is part of a corporate group, only the parent company is eligible.
Bounce Back Loan (BBLS)
  • Allow small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover, up to a maximum of £50,000.
  • 100% of the loan is guaranteed by the government and there are no fees or interest to pay for the first 12 months.
  • After 12 months the interest rate is 2.5% per annum.
  • The loan is for six years and it can be repaid early without penalty but no repayment is permitted within the first 12 months.

The business must:

  • be based in the UK;
  • have been established before 1 March 2020; and
  • be adversely impacted by COVID-19.
  • The scheme is not available to certain sectors (public sector, banks, insurers, etc).
  • You cannot apply for BBLS if you are already claiming under CBILS (see above), CLBILS or CCFF (see below in each case). If you have received a loan of up to £50,000 under one of these schemes you can transfer it to BBLS (before 4 November 2020).
  • There are only 11 lenders participating in the scheme including main retail banks. The lender will decide whether to offer a loan or any other type of finance and the business will be responsible for paying 100% of the amount borrowed.
  • It is possible to apply to another lender if one lender declines to lend.
  • If your business was classed as a business in difficulty on 31 December 2019 you’ll need to confirm that you’re complying with additional state aid restrictions.

Larger Companies

Scheme Name Synopsis Eligibility Notes and Exceptions
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
  • Available for large businesses with an annual turnover of over £45 million.
  • Firms with a turnover of more than £45 million but less than £250 million can apply for up to £25 million of finance.
  • Firms with a turnover of more than £250 million can apply for up to £50 million of finance.
  • The loans are available through accredited lenders a list of which are shown here.
  • 80% of the loan is backed by the government.
  • Term of the loan can be between 3 months and 3 years.
  • No personal guarantees permitted for borrowing under £250,000.

The business must:

  • be based in the UK;
  • have an annual turnover of over £45 million;
  • self-certify that the business has been adversely impacted by COVID-19;
  • not have received a facility under the Bank of England's CCFF scheme.
  • There are 12 lenders taking part in the scheme including all the main retail banks.
  • Any applications must be accompanied by a borrowing proposal which the lender deems is viable and believes will enable the business to trade out of any short-term to mediumterm difficulty.
  • Again there are exceptions to businesses that are not able to apply including banks, building societies, insurers, publicsector bodies and state-funded primary and secondary schools.
  • If a business wishes to borrow more than £50 million, the business must agree to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan.
Covid Corporate Financing Fund (CCFF)
  • Under the scheme, the Government buys short-term debt from large companies.
  • Intention is to allow businesses to finance short-term liabilities.
  • Companies and their finance subsidiaries that make a material contribution to the UK economy are able to participate.
  • It is offered through commercial lenders, backed by the Bank of England.

The criteria for the CCFF are more detailed and can be found here.

 

Disclaimer

The current global crisis is evolving rapidly, and the rules and guidance for individuals, companies and other entities to manage its implications are similarly fast moving. Notes such as this may be out of date almost as soon as they are published. If you have any questions prompted by this note or on any other matter relevant to you, please get in touch with your usual contact at Forsters.

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