As the UK emerges from lockdown restrictions and adapts to new patterns of working, it is likely to be some time before the economy can operate at its previous level of efficiency. For many businesses, these past few months have been critical, and depleted revenues and disrupted cashflows remain a threat to their existence. But help may be at hand.
British Business Bank, through a network of accredited lenders and partners, operates a range of coronavirus business interruption support schemes to support the continued provision of finance to UK small- and medium-sized enterprises (SMEs) during the Covid-19 outbreak. The key features of each are set out below, with more information available on the British Business Bank website.
The Bounce Back Loan Scheme
If your business has been affected during the pandemic and you require a small loan – between £2,000 and £50,000 – you can apply to the Bounce Back Loan Scheme (BBLS) via one of the British Business Bank’s accredited lenders. For the first 12 months you won’t have to pay any interest or make any repayments. Then, for the following five years to when the loan is repaid, interest is charged at a fixed rate of 2.5% per annum – with the ability for early repayment where possible.
Applications for the BBLS close on 4 November 2020. Finance supported by the BBLS is subject to eligibility criteria.
The Coronavirus Business Interruption Loan Scheme
UK-based businesses with a turnover of less than £45m can apply for up to £5m in finance via the Coronavirus Business Interruption Loan Scheme (CBILS).
You can apply for a facility – which may come in the form of a term loan, an overdraft, invoice finance or asset finance – from one of more than 90 CBILS accredited lenders. This includes high street banks, challenger banks, asset-based lenders and smaller specialist local lenders.
Your business repays CBILS term loans and asset finance facilities over a maximum of six years, and overdrafts and invoice financing facilities over three years. The government will cover the costs of the “lender-levied” fees and interest for the first 12 months through a Business Interruption Payment made to the lender on your behalf.
Applications for the Coronavirus Business Interruption Loan Scheme close on 30 September 2020. Finance supported by CBILS is subject to eligibility criteria.
The Coronavirus Large Business Interruption Loan Scheme
If your business has a turnover of more than £45m, you can apply for a facility via the Coronavirus Large Business Interruption Loan Scheme (CLBILS). The upper borrowing limit of this scheme was boosted in May – from £50m to £200m – although invoice finance and asset finance facilities are capped at £50m. Accredited lenders for CLBILS can offer overdrafts, term loans, invoice finance and asset finance over repayment periods of between three months and three years.
If your company wants to borrow more than £50m through CLBILS, further restrictions on dividend payments, senior pay and share buybacks will exist for the period of the loan.
Applications for the Coronavirus Large Business Interruption Loan Scheme close on 20 October 2020. Finance supported by CLBILS is subject to eligibility criteria.
The Future Fund
Since 20 April, the Future Fund has been issuing convertible loans to innovative UK companies affected by Covid-19 that need equity investment. Applications for finance from this fund are investor-led, so your company will need to have already found an investor – or group of investors – willing to finance your company. The government initially made available £250m for investment through the scheme, which would then be matched by private investors. Now, due to the popularity of the fund, more funding is being made available. The scale of the scheme will be kept under review.
If the investors meet the eligibility criteria and provide key investment details, the Future Fund could then match up to 100% of this investment, up to a value of £5m and no less than £125,000. To be eligible, your company must have raised at least £250,000 in previous funding rounds over the past five years.
This funding cannot be used to repay any other loans, or pay dividends, bonuses or advisory fees, and it is loaned at a minimum of 8% simple interest. This interest will be higher if the company and the investor(s) agree between themselves. Unlike a typical bank loan, the interest is not payable on a monthly basis and instead will accrue until the loan converts after 36 months. At this point, the interest will either be repaid or converted into equity, although it may also be converted into company shares in certain circumstances such as an exit or a new funding round.
The Future Fund is also open to innovative companies that participate in accelerator programmes based outside the UK subject to eligibility criteria.
How to apply
Terms and conditions apply to each scheme, which you can learn more about on British Business Bank’s website – as well as accessing a list of accredited lenders – by selecting BBLS, CBILS or CLBILS. Once you’ve selected an accredited lender, you’ll need to apply via their website. If you’re applying for funding via the Future Fund, direct your investor to register with British Business Bank and begin the process.
British Business Bank is a government-owned economic development bank, helping thousands of businesses across the UK access financial information and support that they need to get back on track. British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such. Accordingly, none of British Business Bank’s group of companies takes deposits or offers banking services. Find out more at british-business-bank.co.uk
