WINTER ECONOMY PLAN: LOANS SCHEMES FACTSHEET
Through the extension of the government guaranteed loan schemes, and the launch of Pay As You Grow, the Chancellor is supporting all businesses by taking action to relieve the pressure on their finances in the coming months. This will enable them to grow and to support and create jobs.
Business Minister Lord Callanan said:
"It is vital that we continue to deliver certainty to businesses through this challenging time, which is why we are now extending these important and necessary measures to protect companies from insolvency.
Through this measure, we want to ensure businesses are able to not only come through this testing period, but also to plan, adapt and build back better."
What are the changes?
- The Government is extending Bounce Back Loans, Coronavirus Business Interruption Loans, Coronavirus Large Business Interruption Loans and the Future Fund until 30 November.
- The Chancellor is also launching a new Pay as You Grow system which gives flexibility to businesses in repaying Bounce Back Loans. All borrowers will now have the option to repay their loans over a period of up to 10 years, reducing their average monthly repayments on the average loan by almost half.
- Businesses will also have the option to move temporarily to interest-only repayments for periods of up to six months, and to pause their repayments entirely for up to six months (after they have made their first six payments)
Who will this help?
- More than one million businesses have taken out a Bounce Back Loan, with an average loan size of £30,000.
- These businesses can all benefit from the flexibilities available through Pay As You Grow, helping them to manage their cashflows and protect jobs.
How will it help?
- A business which took out a £30,000 Bounce Back Loan would see their average monthly repayments fall from £532 to £309 (42% reduction) if they repaid the loan over 10 years rather than six. This will boost their cashflow, enabling them to support and protect jobs.
- The same business could temporarily reduce their monthly repayments to just £63 if they switched to interest-only payments.
- Finally, utilising a capital and repayment holiday would reduce monthly repayments to £0, allowing the business a six month period to get back on their feet before resuming repayments.
- The deadlines for applications for the government-guaranteed loans are also being extended to 30 November, meaning that even more firms can benefit from loans to support their business and jobs.
- In addition, the deadline for applications under the Future Fund, which provides convertible loans to innovative companies which are facing financing difficulties due to coronavirus, is also being extended to 30 November. This means more of our most innovate businesses can grow and scale up.
How does it compare?
- This extension brings the application deadline for the UK’s loan guarantee schemes into line with other European countries. Loan schemes in France and Germany – which are subject to the same State Aid rules as the UK - close in December.
- Germany’s Schnellkredit loans scheme also allows repayments over 10 years, but at a more expensive rate of interest (3%) than BBLS (2.5%).
Scheme Usage to Date
- More than 1 million Bounce Back Loans with a combined value of more than £38bn have been approved to date.
- Meanwhile, over 66,000 CBILS loans with a combined value of £15.5bn have been approved to date.
- For larger businesses, 566 CLBILS loans worth £3.84bn have been approved.
- Under the Future Fund, over 700 convertible loans worth £720m have been approved.
- British Business Bank data shows that the proportion of CBILS and Bounce Back Loans awarded closely match the respective share of businesses of each English region and devolved nation.
Government gives businesses much-needed breathing space with extension of insolvency measures
Measures put in place to protect businesses from insolvency will be extended to continue giving them much-needed breathing space during the coronavirus (COVID-19) pandemic, the government announced today (24 September).
A raft of changes to protect businesses from insolvency were introduced in the Corporate Insolvency and Governance Act and were due to expire on 30 September 2020. The temporary measures include:
- companies and other qualifying bodies with obligations to hold AGMs will continue to have the flexibility to hold these meetings virtually until 30 December 2020. This means that shareholders can continue to examine company papers and vote on important issues remotely
- statutory demands and winding-up petitions will continue to be restricted until 31 December 2020 to protect companies from aggressive creditor enforcement action as a result of coronavirus related debts
- termination clauses are still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process. However, small suppliers will remain exempted from the obligation to supply until 30 March 2021 so that they can to protect their business if necessary
- the modifications to the new moratorium procedure, which relax the entry requirements to it, will also be extended until 30 March 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months. Measures will also ease access for companies subject to a winding up petition. The temporary moratorium rules will also be extended to 30 March 2021
- businesses will be protected from the threat of eviction until the end of year following an extension to the commercial eviction ban announced on 16 September 2020
- this extension will protect businesses that are struggling to pay their rent due to the impact of COVID-19 from being evicted and help the thousands of people working in these sectors feel more secure about their jobs
- the government is clear that where businesses can pay their rent, they should do so, as this support is aimed at those struggling the most during the pandemic. This is set out in the Code of Practice which was published in June.