• Colin Smith, employment lawyer and partner at Brachers Solicitors provides an overview on the scheme which was introduced on the 23 March, and provides an update on how it has now been expanded and amended.

    How does the Coronavirus Business Interruption Scheme affect small businesses?

    The scheme has been opened up to smaller businesses who would not have previously met the requirements. This scheme enables lenders to provide facilities including loans, overdrafts, asset finance and invoice finance of up to £5 million to businesses that are experiencing lost or deferred revenues leading to disruption to their cash flow.

    So what has now changed?

    They have now changed the scheme so that insufficient security is no longer a condition to access the scheme, so if that was preventing your eligibility until now, do please go and re-check the rules – they can be easily viewed at the British Business Bank website.

    Otherwise, no personal guarantees now for facilities under a quarter of a million pounds under the scheme; above a quarter of a million pounds personal guarantees can still be required at the lender’s discretion. However, recoveries under those are going to be capped at 20% of the outstanding balance of the scheme facility, after the proceeds of business assets have been applied.

    A principal private residence cannot now be taken as security to support a personal guarantee, or as a security for a scheme-backed facility, and also they want to backdate these changes retrospectively, for facilities provided under the scheme since 23 March 2020.

    Also, what they are asking commercial lenders to do is look at facilities that they have already provided that would now be eligible for the scheme under these amended rules, and consider moving those facilities within the scheme wherever possible.

    So if this scheme wasn’t of use to you until now, please do go and have a further look at the new criteria.

    Should you have any questions about this scheme or the amendments to it, do please contact us and we will be happy to help.

    This content is correct at time of publication

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