One of the schemes I discussed at the time was the Coronavirus Business Interruption Loan Scheme which has come under scrutiny and faced criticism for helping only some businesses, with many other larger businesses also in need of short to medium term financial assistance failing to meet eligibility criteria and therefore being unable to benefit from that scheme. Following such criticism the Government launched the Coronavirus Large Business Interruption Loan Scheme in April for larger businesses to ensure help was available to those businesses who were not eligible for assistance under the existing scheme and who could not take advantage of other available options, such as the Covid Corporate Finance Facility (which I also discussed in that note but which is generally only an option for very large businesses).
So how does the Coronavirus Large Business Interruption Loan Scheme differ from the Coronavirus Business Interruption Loan Scheme? It is unsurprising given their similar names that the schemes are very similar and, largely, work in the same way. The key features of the Coronavirus Large Business Interruption Loan Scheme are:
- businesses with turnover of more than £45,000,000 are now eligible for support provided they:
- are UK-based in their business activities;
- have a borrowing proposal which would be considered viable, but for the current pandemic, and in respect of which the lender believes making finance available will enable the business to trade out of any short-term to medium-term difficulties;
- self-certify that they have been adversely impacted by the coronavirus; and
- have not received funding under the Covid Corporate Finance Facility;
- a lender can provide loans of up to £25,000,000 to businesses with turnover from £45,000,000 up to £250,000,000 and loans of up to £50,000,000 to businesses with a turnover of over £250,000,000;
- like the existing scheme available for smaller businesses:
- finance can be provided by way of term loans, revolving credit facilities, overdrafts, invoice finance and asset finance facilities;
- the Government provides the lender with a guarantee of up to 80% of the amount of the loan (but on the larger scheme only, this is subject to an overall portfolio cap); and
- personal guarantees cannot be taken for loans under £250,000;
- personal guarantees can be taken for loans in excess of £250,000 but the amount of the claim made under any guarantee cannot exceed 20% of all losses after all other recoveries have been made and applied to the outstanding balance of the indebtedness;
- the maximum loan term is 3 years; and
- unlike under the smaller scheme, the Government will not offer business interruption payments (i.e payments during the initial 12 months of the loan to cover interest and any initial up-front costs) - these costs will need to be met by borrowers directly and, as a result, the applicable interest rates and fees will reflect normal commercial terms for many of the 40 lenders who have been accredited to provide funding under the scheme.
The Scheme has only been open for applications for just over a week now so it is too early to tell whether or not it will provide the solution to the obvious funding gap which was left in the mid-upper tier of the borrowing market after the introduction of the Coronavirus Business Interruption Loan Scheme and the Covid Corporate Finance Facility. Time will tell and hopefully results will demonstrate that the Scheme has resulted in the funding that part of the sector desperately needs.