Among the many temporary and emergency measures set out recently by Chancellor Rishi Sunak to support businesses through current economic disruption caused by COVID-19, the Coronavirus Business Interruption Loan Scheme is of particular importance.

The Scheme (which is now open and expected to run initially until 30 September 2020) is intended to support small and medium sized businesses that may now be experiencing short-to-medium term difficulties (including lost or deferred revenues, or disruptions to their cashflow) as a result of the current pandemic.

To be considered for the Scheme through a participating lender, a business must not only satisfy the general criteria of the Scheme (as discussed here) and that lender’s application criteria, it must also submit a borrowing proposal which demonstrates that (i) it was trading successfully before COVID-19 and, were it not for the current pandemic, would be otherwise viable, and (ii) its current financial difficulties are attributable to the current pandemic.

With each participating lender having its own criteria and evidential requirements, and each applicant business having its own particular financial circumstances, any application will require careful consideration and relevant professional assistance. All applicants will also be required to complete a Scheme application form, together with a British Business Bank data protection form (a regulatory requirement which provides permission to the prospective lender to share customer data with the British Business Bank).

Notwithstanding, a prospective applicant should consider, evaluate and collate as a point of priority the documentation or information required to evidence the following key requirements:

Basic Information

  • Management team information (CV’s and Statement of Assets, Liabilities, Income & Expenditure, 6 months personal bank statements); and
  • Most recent business profile document/business plan.

Coronavirus impact analysis

  • Full comment on the performance of the business prior to the onset of COVID-19, and the impact of this on the business; and
  • Full explanation (with evidence) on viability.

Your loan requirements

  • Details of all current and existing credit, hire purchase or loan arrangements (including current balances, repayment obligations, expiry dates, any remaining headroom and of any existing security package (including any guarantees)) and of Summary of other funding and support options;
  • Details of the loan sought (amount, term, purpose, servicing and amortisation details and exit/repayment strategy);
  • Details of assets able to be secured; and
  • Financial calculations showing that the business would have been able to service the loan sought but for the current difficulties.

Mitigating measures taken or to be taken

  • Full details of what measures the business is taking to manage the economic impact of the pandemic, to include:
    • Discussions with current lenders (waivers, capital holidays, restructure etc);
    • Discussions with current suppliers/creditors;
    • Employee measures taken (furlough, redundancies etc);
    • An explanation of the extent to which the business has explored other areas of funding or Government/HMRC support, schemes, grants or other accommodation before applying for this loan;
    • Consideration of short and medium-term expenses, with evaluation of what is necessary and what can be deferred; and
    • Consideration of alternative suppliers, providers etc or other cost-reduction measures.

Historical Performance

  • Most recent audited or management accounts for the applicant business;
  • 3 years full unaudited accounts for the applicant business;
  • 6 months business bank statements for the applicant business;
  • Any recent valuations of material assets (including any able to be secured);
  • Evidence of compliance with recent applicable financial covenants and financial information covenants.

Projections

  • 24 months financial projections; and
  • 12 month cash flow/working capital forecasting on a weekly basis under various scenarios (best outcome to worst outcome – i.e. 6 months of severe disruption), with identifiable resultant cash and time requirements/headrooms, detailing any key assumptions or risks which may impact this.

Please note that not every participating lender offers all of the Scheme products, and are setting different criteria including, importantly, on security. For details on specific lender offerings, visit the Accredited Lenders page on the dedicated section of the British Business Bank website.

Whilst this Scheme will likely be a lifeline for many businesses, the process is still fluid and uncertain in various respects and we continue to monitor developments. If you find yourself in the situation where you think you could benefit, then the above steps should help you prepare to apply, but it will be important to check the most up-to-date guidance before an application is made. If you would like any further information please get in touch.

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