On 8 February 2021 the Treasury confirmed that they are granting businesses who have taken out Bounce Back Loans (BBLs) greater flexibility when repaying the loan.
The amendments are as follows:
- Borrowers can now extend the length of their loans from 6 to 10 years;
- Businesses will have the option to pause all repayments once, for 6 months, at any point during the loan term; this will now be available from the first repayment (as opposed to the sixth repayment previously);
- Businesses can, on up to three separate occasions, make interest-only payments for 6 months.
Businesses still have until the end of March 2021 to be able to apply for various Covid funding schemes, details of which are set out below:
Bounce Back Loans
The key features of bounce back loans are:
- Loans of between £2k up to 25% of a business’ turnover (maximum of £50k);
- Scheme is 100% government-backed;
- Up to 10 years in length;
- Interest and capital repayment free for up to 18 months;
You are eligible for a bounce back loan if:
- You are based in the UK;
- Your business generates more than 50% of its turnover from trading activity;
- Your business is engaged in trading or commercial activity in the UK and was established by 1 March 2020;
- You have been negatively affected by Covid-19;
- You were not an undertaking in difficulty in 2019.
Coronavirus Business Interruption Loan Scheme (CBILS)
For CBILS, repayment terms can be up to 10 years in length. Companies can make interest-only payments for 6 months and businesses under severe pressure can suspend all repayments for 6 months.
The other features of the CBILS scheme are as follows:
- Up to a £5m facility;
- Interest and fees paid by the Government for the first 12 months;
- The borrower remains 100% liable for the debt;
- Lenders are able to set interest rates at their discretion;
- Lenders are prohibited from requesting personal guarantees on loans under £250k;
- For loans over £250k, personal guarantees may still be required at a lender’s discretion, but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied;
- A Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS backed facility; and
- CBILS covers all small companies who are impacted by coronavirus, not just those for whom other forms of commercial funding are not available.
You are eligible for a CBILS loan if:
- your application is for business purposes;
- your business is UK based, with turnover of no more than £45m per year;
- your business generates more than 50% of its turnover from trading activity;
- your CBILS-backed facility will be used to support primarily trading in the UK;
- you wish to borrow up to a maximum of £5m; and
- you have a borrowing proposition which would have been viable pre-Coronavirus
CLBILS (Coronavirus Large Business Interruption Loan Scheme) has the same features and eligibility criteria as the CBILS, other than the below:
- Funding of £50m to £200m can be provided;
- Repayment terms of 3 months to 3 years;
- To be eligible, you must meet the criteria for CBILS above, while also having annual turnover of more than £45m.
The key features of the future fund are:
- The Government can make unsecured bridge funding available alongside other third party matched investor(s);
- Loans of £125k to £5m will be available, subject to a cap of the loan being no more than 50% of the bridge funding being provided to the company;
- Total funding available for the scheme is £250m;
- The funding will solely be used for working capital purposes;
- The Government will receive a minimum of 8% per annum (non-compounding) interest to be paid on maturity of the loan, with maximum loan periods of 3 years.
You are eligible for the future fund if your business:
- is unlisted;
- has raised £250k or more from third party investors over the last 5 years;
- has a substantive economic presence in the UK.
At these difficult times you may benefit from external support to manage workload and to smooth the process with your funders including the following areas:
- Preparing a proposal / business plan for the funders;
- Preparing or reviewing an integrated financial forecast;
- Approaching and liaising with the funders; and
- Project managing the process at this challenging time for your business, enabling you to focus on your business.
RGCF has significant experience of the funding world and how to successfully raise funding, in good times and bad. If you would like to discuss this further, please contact:
Nick Johnson CF Partner
Alex Simpson CF Senior Manager