Businesses can borrow up to £ 10million under the payback loan scheme announced in the budget.

This will be available through a list of lenders that has yet to be announced, providing support as businesses recover and grow from the pandemic disruption, the government said.

See also: How to avoid tightening liquidity on key dates with good planning

The government guarantees 80% of the financing to the lender, but the company’s assets will first be called upon to repair any default, although a borrower’s primary private residence cannot be taken as collateral.

The program starts April 6 and is open until December 31, subject to revision. Interest rates should be capped at 15%.

The types of funding available are:

  • Term loans and overdrafts of £ 25,001-10million / company
  • Invoice finance and asset finance from £ 1,000 to £ 10million / business
  • Funding terms of up to six years for term loans and asset finance.

For overdrafts and bill financing facilities, the terms will be up to three years.

To be eligible, companies must operate in the UK and be able to demonstrate that they:

  • Are or would be viable without the pandemic
  • Have been affected by the coronavirus pandemic
  • Are not subject to collective insolvency proceedings.

Companies that have received support under the existing Covid-19 secured loan programs, CBILS and BBLS, will be eligible to access financing under the new program if they meet all other eligibility criteria.

Closure of the first Covid-19 loan programs in a few days

Applications for the Coronavirus Business Interruption Loan Program (CBILS) and Rebound Loan Program (BBLS) close on March 31.

These loans were first issued in April and May of last year. Most included 12 months of zero interest and no repayments, so repayments will begin in April of this year.

CBILS loans are available up to £ 5million as term loans, overdrafts, bill finance and asset finance, with fixed or variable rates set by the lender.

They are rated for affordability, and in many cases those issued last year assumed trading would return to 2019 levels by the time refunds began.

Any default is recoverable first on the assets of the business and when it is recovered on personal assets, the amount cannot exceed 20% of the loan. After that, the government guarantees 80% of the loan.

BBLS loans range from £ 2,000, with the maximum loan being set at 25% of turnover, or £ 50,000, whichever is lower. These can last up to 10 years, be charged at 2.5% interest, and have been issued without a viability check. However, the company’s assets are at risk if interest and repayments cannot be paid.

If cash is available and the loan is no longer needed, there is no prepayment charge and this would save on interest charges, the advisers said.


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