Emerging from the pandemic – support for the recovery
While April signals the end of the financial year, businesses are now looking to the next 12 months and will be asking how they can survive, move forward or even thrive as the country moves out of lockdown.
This is one of a series of articles from our partners. The views expressed are those of the author and not necessarily those of ICAS.
Many businesses have been supported by a wide variety of government measures and programmes over the last year. Now the focus for all of us is the need to kick-start the economy and begin the recovery. For businesses, decisions they will have to make include how they start repaying the Covid loans they took out, such as a Bounce Back Loan, and whether or not they need to access more funding or support.
Businesses which took out a Bounce Back Loan over the last year were immediately given a 12-month payment holiday. This means that, for those who took out the loans earliest, the first repayment is due in May 2021. To help these businesses, the Chancellor announced back in September 2020 that they would be able to use a series of options, known as Pay As You Grow, to give them more time and flexibility to pay back the loan.
Those businesses with a Bounce Back Loan can request an extension of their loan term to 10 years from six years while having the same fixed interest rate of 2.5%. They can also reduce their monthly repayments for six months by paying interest only, available up to three times during the term of their Bounce Back Loan. Lastly, they are able to take a complete repayment holiday for up to six months, available once during the term of their Bounce Back Loan.
There is also a new scheme launched this month with the explicit aim to support access to finance for UK businesses as they recover and grow following the pandemic. The Recovery Loan Scheme will support borrowing of up to £10m for individual businesses and up to £30m across a group, to be used for any legitimate business purpose, including managing cashflow, growth and investment. It is designed to appeal to businesses that can afford to take out additional finance for these purposes. This new scheme comes after the ending of the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) back in March 2021.
With the Recovery Loan Scheme, the minimum facility sizes will vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts. Businesses can choose from term loans, overdrafts, asset finance and invoice finance. Term loans and asset finance facilities are available from three months up to six years, with overdrafts and invoice finance available from three months up to three years. Businesses are required to meet the costs of interest payments and any fees associated with the facility.
Businesses that have taken out a CBILS, CLBILS or BBLS facility are also able to access the new scheme, although the amount they have borrowed under a previous scheme may in certain circumstances limit the amount they may borrow under RLS.
Lastly, one other option for new businesses and entrepreneurs is a programme that is now in its ninth year and was created to encourage entrepreneurship in the UK, increase the rate of business creation and improve survival prospects.
The Start Up Loan programme offers new businesses loans of between £500 to £25,000 with a fixed interest rate of 6%, and is aimed specifically at businesses who might otherwise struggle to secure backing from high street lenders. As well as finance, the scheme also provides free mentoring and support to individuals, including courses from the Open University. It is open to those who are starting a new business or who have been trading for less than two years, and so far supported the creation of around 80,000 business across the UK. Its aim has always been to support budding entrepreneurs from all walks of life to make their business dreams a reality. This means ensuring that under-represented groups, such as those from minority ethnic backgrounds, women or people who are unemployed, have the same opportunities as anyone else.