Emergency business loans revamped

posted by 1 year ago in Covid-19

The UK’s health minister has warned that the peak of coronavirus infections is likely to be sooner than expected, as the number of cases has risen to over 34,000, with more than 2,900 deaths. This signals an increase in the death toll of 24% in a single day, with the government under increasing pressure to increase testing and reduce the steady rise in cases.

On 23 March enhanced restrictions on movement and closure of non-essential businesses signalled the start of a nationwide lockdown. However, according to the Office for National Statistics (ONS), the turnover for almost 50% of businesses was lower than normal before the lockdown began, as a result of Covid-19. The ONS also reported that 27% of businesses responding to their survey have reduced staffing numbers already. As the outbreak rattles the business world, we take a look at the latest news from across the UK.

Life, work and travel transformed across the UK

According to the AA, the coronavirus crisis will permanently transform the way many of us live, work and travel across the country. As companies begin to adapt and many rely on home-working technology, there are huge implications on the economy. The government is currently planning to spend more than £127billion to build the HS2 and ease congestion throughout the country, however with demand potentially falling both now and after the crisis this may no longer be necessary.

With businesses embracing technology such as video conferencing meetings, the number of people wasting hours travelling on motorways for a single meeting has dropped considerably. It is hoped that the severe restrictions could signal a new way of working for many businesses, who will feel the financial and productivity benefits.

Professor Greg Marsden from Leeds University agrees and is asking the government to switch the budget to more important areas. If current government transport plans are reduced, the budget could be used to assist the inevitable reduction in public finances caused by the outbreak.

Emergency business loans revamped

Following strong criticism, the coronavirus business interruption loan scheme has been revamped, to ensure struggling businesses are able to access the cash they need. The treasury reported that more than 130,000 loan applications were received, however less than 1,000 were actually approved.

Initially, these government backed loans were only available if the business was turned down for a standard business loan via the bank. However, banks were accused of charging interest rates as high as 30% and also asking for personal guarantees, despite 80% of the loan amounts being backed up by the government.

The new changes will mean businesses can apply for the loans, without needing to firstly apply through the bank’s usual commercial loans process. The banks will also be banned from asking for personal guarantees from business owners, if the loan is below £250,000. However, so far there are no restrictions in place on the interest rates which banks are able to charge.

The government has increased the size of the loans available to businesses with a turnover of between £45million and £500million, with government backed loans of up to £25million now available. It is important to remember that any business which avails of this scheme will be required to repay 100% of the debt and there is no cap on interest rates, despite the interest rates to banks being close to 0%.

If your business is looking to increase cash flow, we can help you compare competitive deals across the market from both traditional banks and alternative lenders. Here at BusinessComparison we have partnered with a panel of lenders, so you can quickly compare everything from business loans, bank accounts to overdrafts and invoice finance. To find out more about how we can help your business, please contact our experienced team today.