1. There is a feeling that many hospitality businesses aren’t eligible for the government loans as they are now technically insolvent. Is that the case?
The first test is that the business must have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty. The Coronavirus Business Interruption Loan Scheme (CBILS) is designed for smaller businesses and provides lenders with a government-backed guarantee of 80 percent on facilities ranging from £5k to £5 million. Facilities under the scheme are interest and fee free for the first twelve months. At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so. The scheme therefore allows a lender to provide the business with a facility that they would not otherwise have been able to do. Banks will test viability of businesses applying for CBILS against their own risk assessment framework. More information can be found on the NatWest website and on British Business Bank’s website.
2. If not, how do businesses know they are eligible? What should they be doing to find out?
To be eligible, a business must be:
- Based in the UK, with a turnover of no more than £45 million per annum;
- Seeking a facility up to £5 million;
- Vast majority of sectors are eligible (some different terms will apply for a small number of sectors, including for some agriculture, aquaculture and transport businesses);
- Able to evidence viability
Information on CBILS is available on the British Business Bank website. The scheme is accessible through businesses’ normal points of contact with lenders bank (see the NatWest website if you are a customer of NatWest). If businesses have concerns about their finances, they should contact their lender for support as early as possible. Businesses do not need to contact the British Business Bank to access this scheme.
3. Do you expect many hospitality businesses to take up the loan. What are the key things they will likely be using it for - rent/wages etc?
Judging from the number of enquiries, we predict that take up will be strong for CBILS. These loans can be used for asset finance, or term loans up to 6 year term or general working capital needs via invoice finance or an overdraft up to 3 year term.
4. What hospitality businesses will not be eligible for a loan?
Larger businesses with a turnover of more than £45m. Full eligibility checklist can be found on the British Business Bank’s website.
5. How do businesses apply for a loan – what are the steps they need to take?
The scheme is accessible through businesses’ normal points of contact with lenders (see the NatWest website if you are a customer of NatWest). Further information on how NatWest is supporting its business customers affected by coronavirus is also available on the NatWest website. This support may include:
- Loan repayment holidays
- Temporary emergency loans with no fees
- Immediate access to deposit balances with no penalty
NatWest has also announced £5bn of Working Capital Support for businesses that will see disruption as a result of COVID-19. NatWest has also produced a coronavirus guide for its business customers on, including information of how the bank can help. If you are a customer of Ulster Bank or the Royal Bank of Scotland, further information is available on their websites respectively.
6 – What are the most important things they need to know about the loans – i.e. payback date, how much to borrow?
Loans under the scheme will be interest and fee free for the first twelve months. and businesses will not have to pay arrangement fees. After this twelve-month period interest will be payable and we will let businesses know what the cost of this is. The scheme provides lenders with a government-backed guarantee of 80 percent on facilities of up to £5 million in cases where a lender would not otherwise be able to provide finance to a business. Lenders may require security for the facility. We required personal guarantees to support EFG borrowing by limited companies. We will not take personal guarantees in support of CBILS Loans. It’s important to be aware that the borrower will always remain 100% liable for the debt; the CBILS guarantee is to the lender, not the business. Further information for businesses on CBILS is available on the NatWest website.
7. How do the eligible businesses apply for the grants – what is the process here?
The government has announced that there will be an extra provision for a cash grant of up to £25,000 per business in the retail, hospitality and leisure sector. This is aimed at helping shortfalls in cash flow through this period.
- Businesses in these sectors with a property that has a rateable value of £15,000 and under will receive a grant of £10,000.
- Businesses in these sectors with a property that has a rateable value of between £15,000 and £51,000 will receive a grant of £25,000.
Grant Funding will be provided by Local Authorities and businesses should contact them in the first instance. Further information is available on Gov.uk.
8. What are the other key financial support elements that have been announced that will be crucial for businesses – eg business rates holiday?
Other key financial support includes:
- £10,000 cash grant to the smallest businesses, that pay little or no business rates and are eligible for small business rate relief (SBBR) or rural rate relief will be contacted by their local authority - they do not need to apply.
- A business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.
- Job Retention scheme – HMRC will reimburse up to 80% of wages max £2,500 per month
- HMRC – Time to Pay scheme to defer tax bills
- Statutory Sick Pay – Companies with less than 250 employees will be covered for cost of SSP
- Self-employed and temporary workers – easier to claim Universal Credit and Employment and Support Allowance
Further information on support for businesses is available on Gov.uk.
Phil Brown is head of travel and leisure at NatWest