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Business loan changes

On Thursday 24 September 2020 the Chancellor of the Exchequer Rishi Sunak presented the Winter Economy Plan to Parliament.

The summary below is based on what we know at 25/09/20

https://www.gov.uk/government/topical-events/winter-economic-plan 

The government has announced an extension to the application period for four government-backed loans schemes, and changes to the terms of repayment for Bounce Back Loans (BBLS) and Coronavirus Business Interruption Loans (CBILS).


The government is extending four temporary loan schemes to 30 November 2020 for new applications:  

  • Bounce Back Loan Scheme (BBLS) – Loans are between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee to the lender to provide them with the confidence they need to support the smallest businesses. The borrower does not have to make any repayments for the first twelve months, with the government covering the first twelve months’ interest payments. Under the new Pay as you Grow options (see below), Bounce Back Loan borrowers will all be offered the choice of more time and greater flexibility for their repayments. 
  • Coronavirus Business Interruption Loan Scheme (CBILS) – For businesses with turnover under £45m. The scheme provides loans of up to £5 million with an 80% government guarantee to the lender, giving lenders the confidence to provide finance to SMEs. The government does not charge businesses for this guarantee and also covers the first twelve months of interest payments and fees.
  • Coronavirus Large Business Interruption Loan Scheme (CLBILS) – For eligible UK-based businesses with turnover above £45 million. The scheme provides loans of up to £200 million (to a maximum of 25% of turnover), with an 80% government guarantee to the lender.
  • Future Fund – provides loans ranging from £125,000 to £5 million which are subject to at least equal matching from private investors. Businesses that have already accessed a Future Fund convertible loan cannot apply for another one.


Pay as you Grow  

The government will give all businesses that borrowed under the BBLS the option to repay their loan over a period of up to ten years. This will reduce their average monthly repayments on the loan by almost half. UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments). 

CBILS loan extension – The government intends to allow CBILS lenders to extend the term of a loan up to ten years, providing additional flexibility for UK-based SMEs who may otherwise be unable to repay their loans.