On 27 April 2020 the Chancellor announced a new Bounce Back loan scheme for small businesses hit by the impact on the pandemic, allowing businesses to apply for loans up to £50,000, with government guaranteeing 100% of the advance.

Despite the announcement by the Chancellor he is ‘unconvinced’ by universal government guarantee.

Rishi Sunak reiterated that he “remained unconvinced” of the case for rolling out a 100% government guarantee across all the state’s coronavirus loan schemes. 
“We shouldn't ask taxpayers to bear all the risk of lending almost unlimited sums to businesses who may have very little prospect of paying those loans back – and not necessarily because of coronavirus, said the Chancellor. “Instead, the new Bounce Back Loans carefully target the extraordinary level of state support at those who need it most.”

So what is the New Loan Scheme?
In summary;

• businesses will be able to borrow between £2,000 and £50,000 and access the cash within days
• loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form

The new scheme, will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.

Note: the guarantee is to the lender and not the business, the business will still be responsible for repaying the loan, and debt will still not be suitable for some smaller businesses


The loans will be easy to apply for through a short, standardised online application (just a two page form with no forward-looking business viability tests or eligibility criteria), making this a Fast Track process. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.

The majority of landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics. I personally have also heard of cases of companies struggling with potential rent increases despite the current outbreak.

• Government to introduce temporary new measures to safeguard the UK high street against aggressive debt recovery actions during the coronavirus pandemic;
• The government will temporarily ban the use of Statutory demands (made between 1 March 2020 and 30 June 2020) Statutory demands issued to commercial tenants will be temporarily voided, where a company cannot pay its bills due to coronavirus;
• Winding up petitions issued the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) to commercial tenants will also be temporarily voided, where a company cannot pay its bills due to coronavirus
• Government is also laying secondary legislation making changes to be made to the use of Commercial Rent Arrears Recovery (CRARs), building on measures already introduced in the Coronavirus Act to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.
• As a result landlords and investors asked to work collaboratively with high street businesses unable to pay their bills during COVID-19 pandemic. Tenants are however, being asked to pay what they can afford to pay, and for Landlords and tenants to work together.

This new legislation will be in force until 30 June, and can be extended in line with the moratorium on commercial lease forfeiture.

These measures come on top of a substantial package of business support measures, including a moratorium on evictions for commercial tenants for at least a 3-month period, which includes a suspension of forfeiture rights, which prevents all commercial tenants from being removed from their properties until 30 June.

Should you need assistance with negotiations or help and support considering the longer term options please do not hesitate to contact our Licensed Insolvency Practitioner for a FREE consultation on Tel: 07972928153 and email: lucinda@lminsolvency.co.uk

In simple terms, in a liquidation employment of employees tends to terminate upon appointment of the Liquidator, and the business usually comes to an end (i.e. no prospect of a sale of the business as a going concern). Whereas an Administration process provides protection under a moratorium for the business to continue trading, this includes retaining some or all employees with the hope many jobs will be saved by being TUPER transfer to a new company.

Under the current circumstances, with staff being furloughed, and the start date being crucial for any claim, the type of insolvency becomes more important. If a company is in administration, the administrator will be able to apply for support under the Cover Job Retention Scheme (like any other employer that qualifies) but only where there is a reasonable likelihood of the Administrator bringing the employee back to work after furlough. 

In the first case to look at the Scheme the High Court in Carluccio’s Limited (in administration) [2020] held that administrators who apply for a grant under the Scheme are able to apply funds to the payment of wages in super-priority to all other costs and expenses of the administration.

These means Administrators are able to utilise this scheme to cover costs of trading period (or lock down period whilst sold) if there is a prospect of saving jobs

If you are considering insolvency, please speak to a licensed insolvency practitioner to understand all the key decisions and the implications particularly at this time. We offer a free consultation and are happy to talk through the options available to directors call 07972928153 or email lucinda@lminsolvency.co.uk

KEY FACTS
Each lender will have there own criteria, but to eligible to apply your business must meet the following;

• ​Be UK based business 
• with a turnover of between £45 million and £500 millionper annum; and
• ,Meets the British Business Bank eligibility criteria that businesses: must
  • operate in an eligible industrial sector, a few exceptions apply, which are;
    • Banks and building socities
    • insurers and reinsurers (not brokers0
    • Public-sector orgainsations
    • Employer, professional, religious or political membership organisations
    • Trade unions
  • other may have reduced thresholds (and should seek advice on eligibility);
    • Agricultural and fishing
    • freight transport by road
  • have sound borrowing proposal but unable to meet a lender's normal lending requirements for a fully commercial loan
  • Must have a viable proposal to trade out of difficulty in due course.

Launched April 2020

A list of accredited lenders will be published on the British Business Bank Website.

Click here for a full list of lenders, that can be searched /filtered by type of lending and region >
​
Like any loan application, lenders will require wealth of information, which will vary depending on the type of finance and the terms of the finance offered, but is likely to include;

• Last 2 or 3 years accounts
• Management accounts
• Personal bank statements
• Statements of income and expenditure
• Statements of Assets and Liabilities
• Lending requirement, and more

KEY FACTS
Each lender will have there own criteria, but to eligible to apply your business must meet the following;

• ​Be UK based business 
• with a turnover less than £45 million per annum; and
• ,Meets the British Business Bank eligibility criteria that businesses: must
  • operate in an eligible industrial sector, a few exceptions apply, which are;
    • Banks and building socities
    • insurers and reinsurers (not brokers0
    • Public-sector orgainsations
    • Employer, professional, religious or political membership organisations
    • Trade unions
  • other may have reduced thresholds (and should seek advice on eligibility);
    • Agricultural and fishing
    • freight transport by road
  • Must generate more than 50% of turnover from trading activity
  • have sound borrowing proposal but unable to meet a lender's normal lending requirements for a fully commercial loan
  • Previously received de minimise state aid does not impact eligibility for CBILS
  • Must have a viable proposal to trade out of difficulty in due course.

Click here for a copy of the British Business Bank Quick Eligibility Checklist for SMEs>

Government will be providing lenders with a partial guarantee of 80% on each loan to give lenders the confidence to provide finance to SMEs. The guarantee is not for the business, as such the business (and its directors) remain responsible for repaying the finance.

The scheme has been updated so that personal guarantees cannot be requested for lending below £250,000

For facilities above £250,000 lenders may request personal guarantees, whereby the directors are personally liable for repaying the loan if the business is unable to do so. 

​Security (usually by way of a debenture or floating charge) this could be security of business assets or personal assets but the directors primary residential property is excluded.
​

With over 40 accredited lenders these vary from well known high street banks and specialist asset based lenders to lesser known organisations that offer funding support. Lenders include Barclays, RBS, Metro Bank, Hitachi Capital Business finance and many more. 
​
Click here for a full list of lenders, that can be searched /filtered by type of lending and region >
​
Like any loan application, lenders will require wealth of information, which will vary depending on the type of finance and the terms of the finance offered, but is likely to include;

• Last 2 or 3 years accounts
• Management accounts
• Personal bank statements
• Statements of income and expenditure
• Statements of Assets and Liabilities
• Lending requirement, and more

This scheme has probably seen the most changes and clarification being issued since its launch, together with a very similar scheme for Self employed and freelancers being launched (this scheme does not cover Self employed)

THE SUPPORT
Employers can claim 80% of furloughed workers (employees on leave of absence) usual monthly wage costs, up to £2,500 per month, (£576.92 per week) per employee, plus the associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on that wage
​

KEY FACTS

• All UK businesses are eligible, including;
  • businesses
  • single director companies and owner manged companies
  • charities
  • recruitment agencies (agency workers paid through PAYE)
  • public authorities
  • Except those that receive public funding for staff costs
• Furloughed employees must have been on the PAYE payroll on or before 19 March 2020 (originally 28 February 2020) and notified to HMRC on a RTI submission on or before 19 March 2020; and 
• Employees on any type of contract are covered:
  • Full-time employees
  • Part-time employees
  • Employees on agency contracts
  • Employees on flexible or zero-hour contract
• The scheme also covers employees who have been made redundant since 19 March 2020 (originally 28 February 2020), if they are rehired by their employer (as a result of the scheme being announced)
• You must have a UK bank account

The following are not eligible under this scheme;

• Employees hired after 19 March 2020 (originally 28 February 2020)
• Self employed and freelancers - see separate scheme
• Anyone whilst on Statutory Sick Pay

​The scheme will cover the cost of wages backdated to 1 March 2020, and was initially open for 3 months. This has now been extended to 30 June 2020

​The scheme can be used at anytime during this period, and opened for claims on 20 April 2020

​To access the scheme you need to:

• Designate affected employees as 'furloughed workers'
• Notify employees of the change in status to 'furloughed' - Changing the status of employees remains subject to existing employment law and depending on the employment contract, may be subject to negotiation. 
• submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal which launched Monday 20 April 2020
• See the guidance below for step by step guides to claiming
• It is expected that the average claim will take 4 - 6 days to process

We recommend you seek professional advice in respect of furloughing workers and the terms of contracts of employment, and read the detailed guidance provided by HMRC and the Government below.