The government has got 40 banks to offer the loan scheme. It sounds good but we already think only the most robust of businesses will be successful in getting loans or overdrafts.
What is the benefit?
- Loans of up to £5 million are available to businesses with terms up to 6 years.
- There is no interest to pay on the overdraft or loans for a year (the government pays)
- You will not need to put up a personal guarantee to cover loans below £250,000
- The interest charged will be matched to a commercial rate to reflect the current low Bank of England base rate
- The government provides the bank with a guarantee on 80% of the loan. Which means that, if you go bust, the lenders will still receive 80% of the funds they lent your business. In theory, this means that it should be easier for the banks to lend your business money. We await to see the reality of it though.
What you need to apply?
the government has just announced new measures to make it easier for banks to lend to businesses under the coronavirus loan scheme.
- Banks will still be banks. Whilst the government has forced banks not to take personal gaurantees and to limit the scope of the fees and interest rates they were charging, it is still up to the bank to decide if they will lend you money under the scheme.
- You will stiill likely have to provide management accounts, a business plan and show what the money will be used for and show that the loan is affordable in order to get the bank’s approval.
- There is no guarantee that the bank will find your business an acceptable credit risk even with an 80% gaurantee from the government. The computer could still say NO!
- The good news is that if one bank turns you down you can go to another and try again. We have already have feedback that certain lenders are being more accomodating than others.
How to access the scheme?
You need to apply to one of the 40 accredited banks which are listed here.