The government has announced a new temporary Coronavirus Business Interruption Loan scheme, and that small businesses that already pay little or no business rates will be eligible for a one-off Coronavirus grant worth up to £3,000 as part of a package of measures to help small business.

Business Interruption Loan Scheme

The British Business Bank will deliver the loan scheme, which it says “will be in place in a matter of weeks” to support SMEs to access bank lending and overdrafts. Interest rates will be similar to current bank lending.

The government will provide lenders with a guarantee of 80 per cent of each loan – subject to a per-lender cap on the number of bad loans it can claim for.

The scheme will support loans of up to £1.2m per small business. This new guarantee, which replaces the existing £500m Enterprise Finance Guarantee (EFG), will initially support up to £1.2bn of lending.

Like the EFG, the idea is to give lenders more confidence in approving credit decisions for small businesses that have insufficient security to meet the lender’s normal requirements. More than 40 lenders including the big four banks — Barclays, HSBC, Lloyds and RBS  — provide funds under the scheme as either loans, overdrafts or asset-based lending secured on equipment or invoices.

However, the Coronavirus Business Interruption Loan will offer more attractive terms for both small business and lenders than the EFG.

Lenders will not charge small businesses or banks for this guarantee. And the government will waive the 2 per cent it charges borrowers annually for the EFG guarantee.

However, the small business borrower will always remain 100-per-cent liable for the debt.

Stephen Jones, chief executive of UK Finance, told The Times: “The impact of Covid-19 is already starting to be felt by small and medium-sized businesses around the country, so it’s essential that we get this scheme up and running within days and that it is simple to access.”

The £3,000 Coronavirus Grant

Small businesses that already pay little or no business rates will be eligible for a one-off Coronavirus grant worth up to £3,000. For a commercial property with a rateable value of £12,000, this is one quarter of its rateable value, or comparable to three months’ worth of rent.

Around 700,000 businesses in England currently eligible for Small Business Rate Relief (SBBR) or Rural Rate Relief can apply for the emergency funding.

The Department for Business, Energy & Industrial Strategy will be writing to local authorities this week to outline the scheme, and encourage local authorities to prepare.

This additional £2.2bn of funding for local authorities who collect business rates is part of a package of fiscal measures to help small business survive the Coronavirus pandemic.

The £3,000 Coronavirus grant only applies to small business in England. Business rates in Scotland, Wales and Northern Ireland are set by their devolved administrations.

Business rates scrapped

This comes on top of the government announcing in the 11 March Budget that companies in the retail, leisure and hospitality sectors with a rateable value of less than £51,000 will not pay any business rates this year. This includes hotels, restaurants and coffee bars.

The discount that pubs receive on their business rates will increase from £1,000 to £5,000, as long as their rateable value is below £100,000 in England.

In total, around 900,000 properties, or 45 per cent of all business premises in England, will not pay rates in 2020-21.

Information about how to apply for both these schemes is still vague and the Loan Scheme, in particular, will require the support of banks that will no doubt find it difficult to react quickly. This may provide an opportunity for online lenders that can be more flexible.

If you need help with applying for either of these schemes get in touch with me in the usual way.

Stay safe.

Noel Guilford