More Covid-19 support coming
...for struggling businesses.
Updated 03/04/20: Chancellor Rishi Sunak has announced an expansion of the Coronavirus Business Interruption Loan scheme.
With COVID-19 all over the news right now, things are changing fast for people and businesses all over the world. Social distancing and self-isolation are putting dents in every sector, and there's a lot of worry over how firms will stand up to potentially months of this “new normal”.
The echoes of Chancellor Rishi Sunak's first Budget speech have barely died down and already there have been updates on the support being offered to businesses to help get them through the coronavirus crisis. Here's what you need to know:
The £3,000 one-shot grants that were announced for small businesses with low or non-existent business rates have been upped to £10,000. That's going to pump some significant short-term cash into the veins of around 700,000 firms across the UK. To qualify, you need to be eligible for either Small Business Rate Relief or Rural Rate Relief, and the grants will be handled by local authorities. You shouldn't have to directly apply for the grant, as your local authority should be in touch with you to sort things out.
This move comes on top of the temporary scrapping of business rates for companies in the retail, hospitality and leisure industries. Businesses in those sectors can qualify for up to £25,000 in grant funding if their property's rateable value is between £15,000 and £51,000.
When the Coronavirus Business Interruption Loan system was introduced in the Budget, the government was committed to guaranteeing SME loans of up to £1.2 million. That figure's already been boosted, allowing firms loans of up to £5 million through the British Business Bank. The first 6 months of interest on these loans will be free, and the government will be covering up to 80% of any losses.
To get the loan, you need to be based in the UK and have a turnover of no more than £45 million a year. You'll also have to fit the general criteria for the British Business Bank, which you can find here. The schemes will be offered through all the major banks once the framework's up and running, so talk to your bank or finance provider to get set up.
On the 3rd of April, the business loans scheme was revamped and expanded after it turned out that, despite over 130,000 enquiries being made, fewer than 1,000 had led to loans being approved. The big headline coming out of this is that loans will no longer be denied to firms that haven’t already been rejected for normal commercial borrowing. On top of that, businesses with turnovers as high as £500 million will now be able to get more help, with the government backing loans of anywhere between £45 million and £500 million.
Crucially, the government is putting a stop to banks insisting that business owners risk their homes to guarantee many of the loans being made. Lenders will no longer be able to ask borrowers to put up their own savings or properties to secure loans of up to £250,000. For businesses borrowing more than that, some form or personal guarantee may still be necessary. However, banks won’t be able to insist that borrowers put up their “Principal Private Residence”. Also, any recoveries made will be limited to 20% of the outstanding balance, once the proceeds of business assets have been factored in. It’s also worth noting that no specific cap has been put in the interest being charged. This is still very much a loan, and borrowers will be expected to still to the terms they accept.
Larger businesses will also get some help with their cash flow through the COVID-19 Corporate Financing Facility, which will see the Bank of England basically “buying up” the short-term debts of qualifying firms. You can check the Bank of England site for more on that.
While you're here, take a look at our blog on Sick Pay support for small businesses, and keep checking back for more information.