The coronavirus pandemic is the biggest single challenge this country has faced since World War II.
A global pandemic requires a powerful response, and the government has answered by putting together one of the most comprehensive support packages for businesses that has ever been seen in the UK.
We appreciate that all businesses, whether large or small, will be feeling anxious at this time.
Listening to those businesses to help develop the government’s coronavirus (COVID-19) recovery plan, we have put in place a range of fiscal measures that allow businesses to access the finance they need to get through the pandemic – ensuring they are in the best position to bounce back when the crisis has passed.
One of the most important elements of the support package is the Coronavirus Business Interruption Loan Scheme.
What is the Coronavirus Business Interruption Loan Scheme?
The Coronavirus Business Interruption Loan Scheme (CBILS) has been established specifically to help small and medium-sized businesses access loans, overdrafts, asset finance and invoice finance facilities up to £5m.
The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.
In creating the CBILS scheme, the government was clear in its objectives: we want every small and medium-sized enterprise (SME) to see the light at the end of the coronavirus tunnel.
The aim is to have as many businesses as possible operating closer to normality once restrictions on movement are lifted, getting the entire economy moving quickly into a recovery phase.
Strong SMEs will play a critical part in moving the country from recovery to growth.
That will be reciprocal, because a growing economy will offer businesses opportunities to develop, take on new expertise and, ultimately, enter new markets.
Covid-19 webinar: Sage discussion with the Small Business Minister
Join our live webinar on 17 June to hear from Paul Scully MP, who will share the latest government updates on its response to coronavirus and how it's supporting small businesses.
Am I eligible?
To apply, the business must be based in the UK and have an annual turnover of up to £45m. The business must have a borrowing proposal that the lender would consider viable were it not for the current pandemic, and it must have been adversely impacted by coronavirus.
Many hundreds of firms across the UK fulfil these criteria and as of 24 May 2020, 43,000 loans worth more than £8.1bn have been delivered under the scheme.
How will it help me?
CBILS has been designed to make it attractive to small and medium-sized businesses. Many business owners and finance personnel are naturally cautious when it comes to picking up debt and taking on loans.
We want CBILS to be viewed as a helping hand rather than a potential burden to be carried for years afterwards.
The government knows many SMEs are not able to draw on extensive finance reserves and so CBILS is designed to give businesses liquidity.
As shops are shut and supply chains are paused, money is not flowing through the economy as it normally would.
A CBILS loan should fill the gap that has emerged as the economy has slowed in the past two months.
Ultimately, the support that businesses receive through CBILS should enable them to come out of the other end of the pandemic in a position to continue trading.
It should be used as a bridge to keep your business stable until the daily functioning of the economy has returned to normal.
More than 50 high-street lenders are participating in the scheme, including all the main retail banks. We have made applying for the loan as easy as possible and are working hard to ensure those companies that need it, get it.
The Bounce Back Loan Scheme
Government statistics show that businesses have benefitted from more than £27.46bn in loans and guarantees to support their cash flow during the crisis.
Not all of this is from the CBILS support. In fact, less than a third of it is.
Following feedback on CBILS from UK SMEs, we introduced the Bounce Back Loan Scheme, which enables smaller businesses to access finance more quickly during the coronavirus outbreak.
This was a move that was welcomed by leading business groups including the Federation of Small Businesses, British Chambers of Commerce, and the Confederation of British Industry.
The Bounce Back Loan Scheme was launched on 27 April 2020 and has very quickly been adopted by many small businesses.
It allows businesses to access loans of up to £50,000 in a matter of days. Businesses can borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.
The scheme has been a great success. So far, £18.5bn has been paid out across a total of 608,000 Bounce Back Loans.
The scheme gives the lender a full (100%) government-backed guarantee on the loan and there won’t be any fees or interest to pay for the first 12 months.
After 12 months, the interest rate will be 2.5% a year.
The Future Fund
The Future Fund was announced on 20 April 2020 as part of a wider £1.25bn support package for innovative UK firms hit by the coronavirus.
The package includes £750m of targeted support for research and development (R&D) intensive SMEs through Innovate UK’s grants and loan scheme. It opened for applications on 20 May 2020.
The government has made an initial £250m available for the fund, which provides convertible loans to high-growth companies.
Private investors must at least match government funding on each loan, bringing the total potential investment to at least £500m.
The Future Fund unlocks investment for innovative firms in every corner of the UK affected by the pandemic. It also provides finance for high-growth companies that may be unable to access the CBILS scheme because they rely on equity investment.
What will work for me?
It’s worth spending time thinking about what type of finance will work best for your business.
The first thing businesses should do is speak to their lender as soon as possible, which will enable them to be as prepared as possible.
The British Business Bank and the Institute of Chartered Accountants in England and Wales (ICAEW) have prepared some excellent advice on managing cash flow during a time of economic uncertainty.
It looks at how to seek independent advice, how to engage lenders and investors, and how financial management can help you to keep a close eye on your cash flow.
Looking to the future
As you progress towards reopening your business, you may wish to consult the government’s guidance on returning to work safely and making workplaces ‘COVID-19 secure’ that was created in consultation with around 250 stakeholders, to ensure both you and your employees can return to work confidently.
It was reassuring to see in recent Sage research that the significant majority of SMEs support this updated lockdown advice on returning to work.
It is also worth familiarising yourself with the details around the extension of the Coronavirus Job Retention Scheme, which will continue to support jobs and businesses as people return to work, and give flexibility to bring furloughed employees back on a part-time basis.
I understand your frustrations at this difficult time and your urgency to resume normal operations. The government is continually being guided by the science as we refine economic and social restrictions and begin to fire up the engines of the UK economy.
Coronavirus and your business
We’ve gathered information and resources to help navigate this situation, including tools and webinars, to help you understand what financial support is available.