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Coronavirus Impact On Businesses And The Support Available
Mar

Coronavirus: Impact On Businesses And The Support Available

The outbreak of the COVID-19 Coronavirus will place many businesses in a difficult financial position. As the chancellor, Mr Rishi Sunak stated at one of the daily briefings: ‘the coronavirus pandemic is a public health emergency. But it is also an economic emergency. We have never, in peacetime, faced an economic fight like this one’.

The virus is spreading across the world and we can already see the impact the virus has on businesses and the financial distress it is causing to many companies, partnerships and sole traders.

The prime minister, Boris Johnson said: ‘we must act like any wartime government and do whatever it takes to support our economy’.

We are here to assist and advise on what you can do to apply for financial help amid the crisis.

Government Response – Support For Businesses

On 17th March 2020, the government made an announcement that it will provide businesses with support as the chancellor, Mr Rishi Sunak pledged that £330 billion of funding will be made available to businesses during this difficult time and that they will do ‘whatever it takes’ to keep companies solvent. The government further pledged that should there be a greater need be than the promised £330 billion (which is equivalent to 15% of GDP), additional funds will be provided.

He stated: ‘I can announce today an unprecedented package of government-backed and guarantee loans to support businesses to get through this. Today, I am making available an initial £330 billion of guarantees’

‘That support will be delivered through two main schemes:

  • to support liquidity amongst larger firms, I have today agreed a new lending facility with the Governor of the Bank of England to provide low cost, easily accessible commercial paper;
  • to support lending to small and medium sized businesses, I am extending the new Business Interruption Loan Scheme I announced at the Budget last week, so that rather than loans of £1.2 million, it will now provide loans of up to £5 million, with no interest due for the first six months’.

Coronavirus Business Interruption Loan Scheme (CBILS)

A new loan scheme, the Coronavirus Business Interruption Loan Scheme will be available from 23rd March 2020.

This will be provided by the British Business Bank with the aim to support small and medium businesses. The government will provide the lender with a guarantee of 80% on each loan, which means that this support should be possible for most, if not all businesses. The limit of funding is set at £5 million, which was increased from the original maximum of £1.2 million. Eligible businesses will also have access to the first six months interest free, as this will be covered by the government during the first six months.

The finance products available to business will include the following:

  • Term facilities;
  • Overdrafts;
  • Invoice finance facilities; and
  • Asset finance facilities.

It is important to note that although businesses will not be charged for the guarantee but they will remain 100% liable for the debt and if you would like to discuss what this might mean for you in the future then please contact our office to discuss in more detail.

To apply for the Coronavirus Business Interruption Loan Scheme, the business should consider the full eligibility criteria which has been promised to be published shortly. At the moment, we know that to be eligible, the business must have a turnover of less than £41 million per annum, operate within an eligible industrial sector and have a sound borrowing proposal but insufficient security to meet the lender’s requirements.

The British Business Bank made it clear that any business interested in the scheme, should approach one of the 40+ accredited lenders with their borrowing proposal. We do know that the proposal should be sound, however, we do not yet know what will be considered as such and how stringent the rules will be.

The decision whether the business will be eligible for the scheme, is left to the accredited lenders and if they can offer finance on normal terms, rather than through the Business Interruption Loan Scheme, they will do so. The British Business Bank also stated that any enquires as to repayment terms should be raised with the individual accredited lenders and not the British Business Bank themselves.

The full details of the scheme are not known yet, however, as soon as we have more information, the same will be reviewed by our lawyers so that information can be provided to any business wishing to apply. Please do not hesitate to contact us if you would like to discuss this with one of our IMD Corporate lawyers.

COVID-19 Corporate Financing Facility

This is a new lending facility available through the Bank of England and aimed to support larger businesses. One year corporate bonds will have to be issued by businesses which the Bank of England will purchase to give business liquidity.

Support For Businesses That Pay Business Rates

To provide businesses with further support amid the coronavirus crisis, the Government announced that the retail, hospitality and leisure businesses with property with a rateable value between £15,000.00 and £51,000.00 will have an additional grant made available in the sum of up to £25,000.00.

A 12 month business rates holiday will be introduced for the year 2020 to 2021 for retail, hospitality and leisure businesses.

Local authorities should receive guidance on the business rates holiday by 20th March 2020 and all enquiries on the eligibility should be forwarded to them. 

Support For Businesses That Pay Little Or No Business Rates

To reduce the negative financial impact the coronavirus outbreak is having on businesses, £10,000 grant will be available to small businesses that are currently eligible for small business rate relief. Local authorities should be provided with guidance on this from the Government shortly. 

Insurance

The government advice to avoid pubs, theatres and any public places means that many businesses will be faced with loss of revenue. This caused a lot of criticism as many said that businesses would not be able to claim on their insurance as the government statement was only advisory. However, during his speech on 17th March 2020, the chancellor stated: ‘let me confirm that, for those businesses which do have a policy that covers pandemics, the government’s action is sufficient and will allow businesses to make an insurance claim against their policy’.  

The government is taking more action in an attempt to slow the spread of the virus, as we saw with the recent announcement of school and nursery closures. It is probably imminent that closures of other sectors will be forced.

With this in mind, this means that businesses who have cover might be able to make a claim against their insurers. Each insurance policy will differ, depending on the provider and businesses  are strongly encouraged to review the terms and conditions of their policies. It might be the case that pandemics are excluded from policies, however, it is definitely worth checking and making enquires.

Please get in touch if you would like us to review the terms and conditions of your insurance policy and consider whether you have a right to make a claim.

Our Business Lawyers Are Here To Help With The Coronavirus Impact On Businesses

If you require help or additional information, please contact one of the lawyers in our business team on 0330 107 0107 or email business@imd.co.uk or arrange a call back.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

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