Inca COVID-19 Update 3: Business Interruption Loan Scheme
25th March 2020
Welcome to our Covid-19 update, bringing you practical information and guidance to help you trade through these challenging times.
24 hours seems such a short time and yet so much has happened. The announcement of the effective UK lockdown has caused considerable additional distress to business owners, with more deciding to shut their doors. At the same time, their relief that we might be able to do something to control the spread of the virus.
We’ve received further details about the business loan interruption scheme from Barclays, which we now share with you.
Business Interruption Loan Scheme
Not surprisingly, we’re receiving numerous calls from clients wanting more detailed information about the government-guaranteed Business Interruption Loan Scheme. These loans are available to businesses having a short to mid-term funding need due to the COVID-19 pandemic.
Because these loans are partially guaranteed by the government, banks are able to offer them (subject to eligibility and status) to businesses that would not ordinarily be eligible for bank funding due to a lack of sufficient financial security.
Below are some key details of the scheme which we’ve taken from information supplied by Barclays Bank. It is our understanding that these same details will apply to Business Interruption Loans provided under the scheme by other banks.
How much can you borrow?
The minimum amount you can borrow is £25k, and loans are available up to a maximum of £5m.
You will not be able to borrow more than twice your annual wage bill or more than 25% of your total turnover in 2019.
Over what period are loans repayable?
Repayment terms can be arranged over 1 to 6 years.
How are businesses assessed?
Each business will be assessed on its individual circumstances to ensure it is offered an appropriate loan. Pricing will be consistent for all businesses and not based on an assessment of risk.
What can loans be used for?
A Business Interruption Loan can be used for a wide range of business needs, from buying assets to providing funding for working capital, subject to certain restrictions.
How much of the loan is guaranteed by the government?
The government will provide your bank with a guarantee for 80% of the loan – but you will be responsible for repaying 100% of the amount you borrow. The government will cover interest, arrangements and security fees for the first 12 months.
What happens after 12 months?
After the first 12 months, you will be charged interest at an agreed margin over the Bank of England bank rate, but fixed-rate options can be requested.
A capital repayment holiday can be requested (subject to application) at the start of the loan or mid-term, and you can repay the loan early – in full or in part, without incurring prepayment fees
If you want to apply for a Business Interruption Loan, you should contact your bank as soon as possible. There is likely to be a very high demand for these loans and processing applications will take time. Getting your application in now will help ensure you receive your loan in time to help your business trade through this challenging period.
We hope you find this information useful. Please feel free to share it with other business owners in your contact sphere.
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