Sources of Funding for Businesses

Over the last couple of weeks, we have seen more businesses starting up again or making plans to recommence trading.  If your business is in this position now may be a good time to think about what funding you will require, if you have not already done so.

Your own bank is the most obvious starting point and the following loans are still available: –

Bounce Back Loan Scheme (BBLS)

Small and medium sized businesses can borrow between £2,000 and £50,000 based on 25% of turnover. The loan can only be used to provide economic benefit to the business, such as providing working capital and must not be used for personal purposes.

The loan period is six years with no capital repayments due for the first 12 months. The Government will guarantee 100% of the loan and there will also be no fees or interest payable for the first year.  The interest rate thereafter will be 2.5% per annum.

To qualify the business needs to have been established on or before 1 March 2020, based in the UK and adversely effected by Covid 19.

If your business was classed as a business in difficulty on 31 December 2019, you will need to confirm that you are complying with additional state aid restrictions.

You cannot apply if you are already claiming: –

• Coronavirus Business interruption Loan Scheme (CBILS)
• Coronavirus Large Business Interruption Loan Scheme (CLBILS)
• COVID 19 Corporate Financing Facility

If you have already received a loan of up to £50,000 under one of these schemes, then you can transfer this into the BBLS.

The BBLS application process is very straightforward with no projections required.

https://jsca.co.uk/bounce-back-loan-scheme-bbls-now-open-for-applications/

Coronavirus Business Interruption Loan Scheme (CBILS)

This loan assists small and medium sized businesses to access loans and other finance of up to £5M. The government guarantees 80% of the finance and pays the interest and any fees for first 12 months. The finance may be made up of loans, asset finance and invoice finance.

You can apply for this loan if your business is based in UK and has an annual turnover of up to £45M. You also need to show that your business would be viable, if not for the pandemic, and that it has been adversely affected by the coronavirus.

The loan period is up to 3 years for overdrafts and invoice finance and up to 6 years for loans and asset finance.

The loan application will require supporting documents which may include:

• Management accounts
• Cash flow forecast
• Business plan
• Historic accounts
• Details of assets

The application process is more detailed than for BBLS.

https://www.gov.uk/guidance/apply-for-the-coronavirus-business-interruption-loan-scheme

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

This scheme assists medium and large sized businesses to access loans and other finance of up to £200M.

It is like CBILS but, to qualify, the business must have turnover of over £45M.

https://www.gov.uk/guidance/apply-for-the-coronavirus-large-business-interruption-loan-scheme

Other Loan Funds  

There is other finance available. The list below is not exhaustive and is aimed at Scottish based businesses:

• Business Loans Scotland – COVID Working Capital loan

This offers loans of £25,000- £100,000 with an initial 3-month capital and interest holiday

The business should have previously applied for a loan under the BBLS or CBILS

https://www.bls.scot/covid-19-working-capital-loan

• Business Loans Scotland – Start-up & Growth loan

There are loans available of £25,000- £100,000

https://www.bls.scot/start-up-and-growth-loan

• Future fund

This fund is aimed at innovative UK companies with good potential that typically rely on equity investment and are currently affected by Covid-19

https://www.uk-futurefund.co.uk/s/

• Other loans for businesses in different sectors, such as housebuilders, open from time to time

https://www.gov.scot/publications/coronavirus-covid-19-liquidity-support-sme-housebuilders/

Secondary Lenders

We have been advised that after pulling out of Scotland, there are secondary lenders returning to the Scottish business market.  This will hopefully provide alternatives to the usual High Street names.

Asset Finance

If you have assets in your business, such as a motor vehicle fleet or large items of machinery, that are not already financed then asset finance may be the quickest option to get an injection of cash into your business.

We can put you in touch with Asset finance providers if this is of interest.

Invoice Finance

Invoice finance has been around for a while and is still available.

This enables you to effectively sell your debtors to a third party for a percentage of their value and can be a useful short-term source of funding for businesses whose debtors are slow payers.

 

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.