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UK Finance Reports a Shift in Lending Needs for SMEs as Caution Rises

UK Finance today releases its latest Business Finance Review which reports on the finance needs of small and medium-sized enterprises (SMEs).

Our latest review shows the expected slowdown in lending to SMEs following a reduction in applications for finance – particularly loans – in the previous quarter. SMEs’ demand for finance continues to be muted this year as they become more cautious because of the uncertain year ahead.

Gross lending

The figures from Q3 showed a continued softening in applications for finance from SMEs. Overdraft applications continued to trend up in the third quarter, but demand for loans fell.

Gross lending through loans and overdrafts to SMEs edged down to £4.5 billion from £5.1 billion in the previous quarter. In London, this represents the second quarter of declining lending values. The South West also saw a marked drop which could be due to the decline in finance applications from the agricultural sector, which is highly represented in the region. For other regions of the UK, lending remains stable and similar to pre-pandemic levels.

Meanwhile, overdraft applications represented the highest volume of applications since Q1 2020. This points to cashflow management and working capital requirements rather than business development.

Invoice finance and asset based lending (IF/ABL)

IF/ABL advances continued to grow and have now surpassed those reported in 2020 Q1, approaching the levels seen in 2018/19. There have now been nine consecutive quarters of growth, with advances at the close of Q3 2022 standing at almost £22 billion.

Data shows that there was strong growth in the number of the clients that are supported, with total client sales up 14 per cent. IF/ABL business continued to have access to funding in existing facilities.

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We continue to see relatively modest changes in the aggregate picture across SME cash deposits.

At the end of Q3 total deposits fell by just under one per cent compared with three months previous, and by two per cent relative to the same period a year ago. This does however vary by sector. There has been a somewhat larger drop off in deposits in accommodation and food services, and health and social care. In contrast, cash deposits were higher in construction and real estate.

Source: UK Finance

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How To Get A Business Loan

Whether you’re planning to expand your business with new premises or equipment or to invest in recruitment or marketing, you may be considering taking out a business loan.

To help you decide whether a business loan is the right finance option for you, here we take a look at what they are, what you’ll need to apply for one, and the alternatives, as well as answering some common questions about business loans.

What is a business loan?

A business loan is a form of borrowing for commercial businesses rather than individuals. Some may be more suitable for start-up businesses while others may only be suitable for businesses with a certain number of years of filed accounts.

You’ll usually repay the amount you borrow in monthly instalments over an agreed period of time, with interest on top. Typically, business loans are for amounts from around £1,000 up to potentially millions of pounds.

Are business loans secured?

Business loans can be secured or unsecured. A secured loan is one that is linked to an asset, such as property, vehicles or stock. This means that if you can’t make payments, the lender may take your asset to pay for the loan.

As there is less risk to the lender, secured loans are usually for higher amounts and interest rates are usually lower.

Unsecured loans don’t require an asset as security so tend to be for smaller sums and come with higher interest rates. Unsecured loans may be more suitable for small businesses without large assets.

Some lenders will ask for a personal guarantee from a company director for an unsecured loan.

What types of business loan are there?

Some of the most common types of business loans include:

Bank loan
With a bank business loan, you’ll borrow a set amount of cash from a bank or building society over an agreed period of time, with interest.

Government-backed Start Up Loan
This is an unsecured personal loan backed by the government to start or grow your business. To apply for this type of loan, you must live in the UK, be over the age of 18 and have (or plan to start) a UK-based business that’s been fully trading for less than 24 months.

Start Up Loans have a fixed interest rate of 6%, are for amounts of from £500 to £25,000, and you can repay the loan over a period of one to five years.

Short-term business loan
Short-term business loans are aimed at commercial organisations which want to borrow for a few months, rather than years, and don’t want to be tied into lengthy repayments. They can be over a period of weeks or months. However, they tend to charge higher interest rates than other loans so make sure you know what these are.

Peer-to-peer business loan
With a peer-to-peer loan (or a P2P), you’ll borrow money from private investors rather than a bank. You will usually be matched to these investors through an online platform. You may need to pay a fee to arrange the loan, so pay careful attention to any fees, charges and interest rates before committing.

Cash advance
A cash advance business loan (also known as merchant cash advance) allows you to borrow money against your business’ future credit or debit card sales. The amount you repay monthly will be based on a pre-agreed percentage of your card sales, so you’ll pay more when your business is doing well and less when it’s not.

Invoice finance
This is when a lender uses your unpaid invoices as security to lend to you. There are two main types of invoice financing:

Invoice factoring – you’ll be able to borrow a percentage of the value of your invoices and the lender will collect payment direct from your customers. The lender will then take its costs and you’ll be paid the remaining balance.
Invoice discounting – this allows you to borrow against the value of your invoices, but you’ll collect money from your customers and then pay your agreed fee.

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How do you decide which type of business loan to apply for?

When considering taking out a business loan and deciding which type to apply for, you’ll need to think about:

  • how much money you want to borrow
  • which loans are suitable for your business type – some loans such as Start Up Loans are only suitable for new businesses, while cash advance business loans are only suitable for businesses that generate a certain amount of revenue via card payments
  • how much you can afford to pay back each month, taking the interest rate into account
  • the length of time you’d like to take the loan out for. While it may be tempting to take a loan out over a longer length of time, you may end up paying more overall in interest
  • comparing the fees and charges with each loan you are considering.

It’s important to compare your options and to shop around before committing to an option or lender, looking at the overall costs of borrowing.

Applying for a business loan

Before you apply for a business loan, you’ll need to be clear about:

  • the amount you’d like to borrow
  • what you are borrowing the money for
  • how much you can afford to repay each month
  • how long you’ll need to repay the loan.

As with other types of loans, your business’ credit rating is likely to be checked, with more competitive loan terms generally being offered for those with a good credit score.

Some ways to improve your business’ credit score include:

  • checking your credit report and disputing any errors
  • paying bills on time
  • if you’re a limited company, filing full, rather than abbreviated, accounts to Companies House
  • making sure you have enough money in your account to cover any planned payments
  • only applying for credit when you need it. Making lots of applications suggests you are struggling financially. You could ask for a quote instead
  • keeping all of your information, such as your business address, up-to-date. Notify suppliers, as well as Companies House, of any changes
  • avoiding county court judgements (CCJ) as these are recorded on your credit report.

You may also be asked for copies of your business accounts, bank statements, details of profits and loss, tax returns, a business plan and proof of address and IDs of company directors.

Once you have gathered your documentation and have decided on the type of business loan most suitable for you, you can shop around then apply.

Comparing business loans

When comparing loans, some important elements to check are:

  • whether you are eligible for the loan you are considering. Always check the lender’s requirements carefully before applying
  • what the interest rates are for the loan and whether they are fixed or variable. It’s worth remembering that Representative APR means that the rate, or lower, is offered to at least 51% of applicants, so 49% of applicants will likely be offered a higher rate
  • whether your loan provider offers a repayment holiday (a few months off paying). However, taking a break from paying will mean that it will take you longer overall to pay off the loan and you’ll pay more in interest in the long run
  • whether there’s an early repayment charge on the loan.

Alternatives to business loans

If you don’t think that a business loan is for you, there are other options including:

  • Business credit cards – if you are looking to borrow smaller sums, a business credit card may be suitable. You may benefit from an interest-free period on your purchases. However, always pay your balance off each month to avoid paying interest charges or fees and check what the card’s annual fee and interest rates are after any 0% period.
  • Crowdfunding – this allows you to raise investment, often by pitching your business idea online, in exchange for rewards for the investors you attract. You could sell a stake of your business through equity crowdfunding or offer a reward such as free products or tickets through reward crowdfunding.
  • Overdrafts – your business account may have an overdraft which is either interest free or a low APR. This is usually only suitable for small amounts, though, and you’ll need to check the terms of your overdraft and stick to them.

By Cathy Toogood, Jo Groves

Source: Forbes

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One in four small businesses fear closure

Small business owners say survival is their key priority over next six months as energy prices rocket and 80% have difficulty recruiting staff.

More than a quarter (27 per cent) of small business owners fear their businesses may close in the future, while two in five (42 per cent) say avoiding closure is their priority over the next six months.

Almost a third (31 per cent) of small business owner-directors worry that their businesses won’t be able to keep up with outgoings, while over a quarter (26 per cent) are using less electricity to save on bills.

The research, conducted by YouGov and commissioned by Meta, polled over 1,000 British small business decision makers of companies with fewer than 50 employees.

Steve Hatch, VP Northern Europe, Meta, said, “Small businesses are the lifeblood of the UK economy and right now they face the challenge of a lifetime just to keep the lights on.”

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Recruitment problems

Meanwhile, nearly 80 per cent of businesses are having problems recruiting staff with manufacturing and hospitality most badly hit.

As a result, more than half of businesses (56 per cent) say they are operating below full capacity, with the problem most widespread in hospitality (71 per cent).

Sixty-two per cent of businesses are trying to recruit staff, according to the British Chambers of Commerce latest quarterly recruitment outlook. The figure is largely unchanged from the spring, before spiralling borrowing costs and political uncertainty rattled confidence among consumers and businesses.

Alex Veitch, director of policy and public affairs at the BCC, said: “Unless we find a solution to the longstanding recruitment difficulties facing UK businesses then any plans to boost economic growth are doomed to failure. We have to fix the people problem before we can make headway on the productivity issue.”

The unemployment rate in the UK is 3.5 per cent, its lowest level since 1974, but at 1.25 million, the number of vacancies is close to a record high.

British Chambers of Commerce surveyed more than 5,100 businesses for the survey, 92 per cent of which were small businesses.

By Timothy Adler

Source: Small Business

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Businesses Defy Gloomy Outlook with Plans to Succeed in Next Three Months

Despite the considerable headwinds of soaring energy prices, recession forecasts, and soaring inflation, small business leaders in the UK nonetheless remain bullish in their approach, with the majority adapting and reacting to the changing economic environment.

Research from Novuna Business Finance from the quarterly tracking study of 1,201 small business leaders found that while 34% of small businesses currently predict growth, 70% are looking for ways to try to adapt and grow. This proportion has increased from 67% at the start of the year (Q1’22).

Focus on cost control

Of these businesses, costs and cashflow have been the dominant issues to tackle – 55% said they needed to reduce fixed costs, 30% were trying to improve cash flow and 25% were trying to tackle late payment. There was also a slight increase in the proportion looking to streamline their supply chain on the start of the year (9%, up from 7%).

Dealing with rising costs was the biggest worry for small businesses fearing their business would contract in the coming months – here, 73% of respondents are desperately looking at ways to keep fixed costs down.

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Investment plans remain positive

Looking at active investment, the results showed around one in eight (12%) businesses were looking to invest in new equipment for their business in the coming months, which was in line with the average for the past two years (12%). This figure increased to 26% among businesses in the manufacturing sector, up from 23% at the start of the year, and 14% of agriculture businesses (also up from 12%).

Meanwhile, around one in seven (13%) businesses were looking to expand into new markets or overseas in the coming months, again in line with the average for the past two years. This figure increased to 22% among businesses experiencing significant or moderate growth.

Around one in seven (15%) said they would be looking for additional staff in the next three months, which was only slightly down on previous quarters (18% in Q1’22, and 18% in Q3’21). The exceptions to this, however, were in the legal (26%) and finance and accounting (19%) sectors, where the proportion looking to hire increased slightly (from 21% and 18% respectively). Similarly, high hiring figures could be seen among businesses experiencing significant growth (58%), and moderate growth (29%).

Jo Morris, Head of Insight at Novuna Business Finance comments:

“There has been no let up for small businesses for an extended period now, and signs on the horizon of the storms clearing appear bleak. Rampant inflation, soaring energy costs and shrinking economic growth present merciless trading conditions, all after the serious challenges presented to small businesses during the pandemic. And yet, once again, we see the resilience displayed by small business leaders in their outlook and plans to achieve growth during this time.

“Making plans to grow is often the best form of protection during a challenging period. It provides direction to navigate through the storm, and mitigates the scrapes along the way. It also puts a business in the best position to pounce on opportunities that emerge during a crisis. At Novuna, we work with small businesses to plan for the long term, not just the immediate challenges directly in front of them, helping them to grow during the good times and bad.”

Source: Business News Wales

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Investment in smaller businesses in the East Midlands is on the rise

2021 was an exceptional year for UK equity finance, with investment in smaller businesses reaching nearly double its 2020 level at £18.1bn.

This is good news for businesses, as the country continues to recover from the impacts of the COVID-19 pandemic and tackles new economic headwinds.

Encouraging signs for the East Midlands

The British Business Bank recently launched its Small Business Equity Tracker for 2022, revealing an encouraging rise of investment in the region.

Smaller businesses in the East Midlands secured £154m of investment across 50 deals in 2021. This represented a 92 per cent increase on 2020, while the number of deals increased by 32 per cent.

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Tech is leading the way

The technology sector attracted the largest amount of investment in the East Midlands at £35.2m, up by 188% from £12.2m in 2019. From a low base, the number of deals are rising gradually across most tech sectors and it’s encouraging to see the value of deals increasing within life sciences, trebling compared to 2019 to £12.8m and clean tech increasing to £7.9m, from less than £100,000 invested in 2019. Across the UK, investment in environmentally friendly clean technology was worth £436m, up 38 per cent from the previous year.

Although this data signals investor confidence in the region, businesses outside of London, including in the East Midlands, are still underrepresented in terms of their share of equity finance.

Last year, 1,286 deals worth £11.9bn took place in London, representing 49 per cent of the UK’s total number of equity deals and 66 per cent of total investment – both a slight increase on 2020’s figures (three and one per cent respectively).

This was however due to stronger growth in London than the rest of the UK, rather than a decline in the activity in the other regions in 2021. The British Business Bank is working to identify and reduce regional imbalances in access to finance through a series of programmes to support supply of and demand for finance across the UK regions.

In the Midlands, our Midlands Engine Investment Fund (MEIF) has provided key financial support for SMEs throughout the East and West Midlands, with more than £150m of investment since 2017, with an additional £251m of private sector co-investment leveraged as a result of the MEIF’s work.
Our Regional Angels Programme commits funds for investment alongside business angels and other early-stage equity investors, acting as a catalyst to bring longer-term capital to smaller businesses with growth ambitions.

Commitment to smaller businesses

The East Midlands is a region of innovative business, covering a whole host of sectors that are striving for growth. The rising level of investment is a big indication of confidence in the area after the uncertainty and adversity they have faced over the past few years.

Smaller businesses will continue to be mindful of economic challenges in the coming months, the British Business Bank will be working to help companies looking to grow access the finance they need to succeed whatever the stage of their development

Information can be found, along with independent and impartial advice, on the British Business Bank Finance Hub – which outlines all the financing options available to small businesses.

By Dr Sophie Dale-Black

Source: The Business Desk

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Starting A New Business: Best Ways To Raise Finance

Raising finance is one of the biggest challenges that many new businesses face. Moreover, if you have big plans for the future, you may even require additional funding. For example, this may be as simple as boosting production or an ambitious step, such as buying another company. Regardless of your goals, there are many different ways to seek funding, which don’t always mean you need to rely on traditional avenues, such as banks. The most appropriate funding option for you will be determined by your circumstances, including the size of your company and the nature of your growth plans. This article will find some of the best ways to secure financing for your new business.

Bootstrapping Your Business

Self-funding, also known as bootstrapping your business, is an effective way of financing, especially when you’re just starting out. It is common for first-time business owners to have difficulties securing funding without showing some traction or a plan for growth. As a result, many entrepreneurs invest from their own savings and ask their family and friends to contribute. This is normally easier to raise, as there will be fewer formalities and compliances to consider. Bootstrapping your business may be a good funding option if the initial requirement is small. However, if you need money from day one, you may want to consider other solutions.

Bridging Loans

Bridging loans can be used by businesses to cover their funding requirements in a variety of situations. They’re designed to be used in limited circumstances and typically in anticipation of a business receiving long-term funding. Advias is an experienced and reputable financial advisor who specialises in bridging finance, development finance, and premium mortgages. Thanks to their in-house analysis tools and extensive database of lender contacts, they can deliver accurate solutions in a timely manner. When it comes to starting a new business, bridging finance can help fill in the gaps and ensure that all necessary purchases can be made to kick-start the process.


Crowdfunding is a way of raising finance, which involves asking a large number of people to each invest a small amount of money. There are several different types of crowdfunding, including donation, equity, and debt. Donation crowdfunding means that people are willing to donate money to your enterprise simply because they believe in your vision and goals and will want nothing in return. Equity crowdfunding refers to people who invest in your business in exchange for shares and a stake. Finally, debt crowdfunding means that people lend you money, which they expect to receive back with interest.

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Credit Cards

Business credit cards are some of the most readily available ways to fund a new business, as they offer a quick way to get instant money. This may be a good funding option for you if you have just opened your business and don’t have many expenses. You can use a credit card and continue to pay the minimum payment. Nevertheless, remember that interest rates and costs associated with credit cards can build up very quickly. As a result, if you don’t use your credit card responsibly, you may accumulate debt, which can damage your business owner’s credit.

Business Grants

Your business may be eligible for a small business grant, which can help you cover certain types of expenditure. Take a look at the business finance support, that is available for start-ups and other small businesses. It can cover things such as the cost of premises, IT equipment, and machinery. Each grant will require a different application process, including strict qualification criteria. While there is no guarantee that you’ll be eligible, it’s still worth exploring your options, especially if you have just started a new business.

Angel Investors

Angel investors are typically high-net-worth individuals who invest in businesses during the early stages of their development. Usually, investors use their disposable finance to provide equity finance to a company. In exchange, they will normally take shares in the business and express an active interest in the company’s growth. Therefore, they must believe in the business and in you. In addition, angel investors will support you with their knowledge and expertise so that they can see a strong return on their investment within three to eight years.

Venture Capital

You may consider a venture capital firm if you need a serious amount of money in exchange for a big percentage of your company. However, this is a competitive area, so you will need an outstanding strategy, as well as a great business plan and an impressive pitch. In general, a venture capital investment may be suitable for small businesses that have moved past the start-up phase and are already generating revenue. Keep in mind that this may not be the best option for you if you’re not interested in mentorship and compromise.

By Sam Allcock

Source: Business Mole

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UK ranks second for business startup financing

UK startups raised more cash in early 2022 than counterparts in China, France or India, and were surpassed only by the US, data showed.

The figures from data provider Dealroom were published alongside the UK government’s new digital strategy on the first day of London Tech Week.

UK startups raised a record $11.3 billion in venture capital in the first three months of the year, according to Dealroom.

And they raised $15.6bn in the five months to the end of May, half of which was from the technology sector.

This performance was dwarfed by $123.4bn in the US, but beat $11.8bn in China and $14.8bn in India.

“So far this year, the UK has raised more venture capital than any other country in the world apart from the United States, overtaking both India and China compared to full year 2021 rankings,” Dealroom said in a statement.

The performance marked a “record quarter” for the industry, despite a “turbulent start to the year for global markets” following Russia’s invasion of Ukraine, according to Dealroom.

The data provider added that Britain currently has 122 “unicorn” businesses — technology firms that are worth more than $1bn.

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Technology minister Chris Philp, unveiling the government’s new digital strategy at London Tech Week, said its goal was cement Britain’s place as a “global tech superpower”.

“In the last five years the UK has raced ahead of Europe to become a global tech leader and now we’re setting the course for the future,” Philp said in a speech at the industry event.

“The digital strategy is the roadmap we will follow to strengthen our global position as a science and technology superpower.”


Source: gg2

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Unsecured Business Loan – Case Study

The Client

A successful second-hand vehicle dealership who was seeking £100,000 of working capital to facilitate ongoing growth of his business. In particular, the client wanted to purchase higher value stock which would generate greater profit margins. The client had no business assets that could be used to secure against the loan and was a non-homeowner, so no personal assets to be used either – this therefore makes the loan being sought unsecured.

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The Solution

As the client had no substantial assets that could be lent against, it was very important to understand what the annual turnover for company was, as this would determine what the client could potentially borrow. The client’s business was successfully generating a good turnover and net profits which we growing year on year, which lenders like to see.

We were able to acquire the customer a very competitive unsecured business loan for the full requested loan amount of £100,000, purely based on the company’s turnover. This will allow the company to grow, purchase the necessary stock and ultimately make the business more profitable.

The whole deal took less than 7 days from initial enquiry to funds being released to the client, who was delighted with the terms secured for their business.

Key Points to consider

As a general rule, if the client has assets or is a homeowner, financial providers can often lend between 15% – 25% of the business turnover. However, in this case, since neither asset is available to use as security, the maximum unsecured loan available is normally 10% of the company’s turnover.

Please keep in mind that these are only broad guidelines. Each case is looked at individually and treated on its own merits.


For full details on the types of Business Loans available please visit our Business Loans page.

To know more and speak to one of our Business Finance Brokers for a FREE Quotation and Advice, call us now on 03303 112 646. You can also fill in this short online form to get started. Our team of Business Finance Brokers will get back to you straight away.

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Government to back new business loans of up to £10m

The Government is to back business loans of up to £10 million for companies that need support until the end of the year as its Covid-19 lending schemes run out.

Chancellor Rishi Sunak told MPs he plans a new Recovery Loan Scheme to tide businesses over.

From April 6 it will replace the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and its larger sibling CLBILS.

The Treasury will promise to cover 80% of what banks lend if businesses do not pay back their loans.

Mr Sunak said: “Some businesses will also need loans to see them through. As the Bounce Back Loan and CBIL schemes come to an end, we’re introducing a new Recovery Loan Scheme to take their place.

“Businesses of any size can apply for loans from £25,000 up to £10 million, through to the end of this year.”

The new scheme has the same Government guarantee as CBILS and CLBILS, but is less generous than the 100% guarantee for BBLS.

Bounce back loans were first unveiled in late April last year and became available to businesses just days later in early May.

With the higher guarantee, and less rigorous controls from lenders, the bounce back loans have proven by far the most popular of the three schemes, both in terms of the number of loans granted and the total amount lent.

By February 21, more than 1.5 million businesses had been lent £45.6 billion in total, with another half a million having applied.

The BBLS was intended to quickly funnel cash from banks to small businesses, up to £50,000 each. The Government gave a 100% guarantee on the loans to ensure banks were not reluctant to lend.

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BBLS, CBILS, CLBILS and the Bank of England’s Covid Corporate Financing Facility have between them provided tens of billions of pounds in UK business loans.

In September, Mr Sunak promised a new form of Covid loan scheme would be introduced at the beginning of the new year to replace the three Treasury-backed schemes. However this was later put on hold as infections and deaths soared, leading to more lockdown measures.

The Treasury also said it plans to give HM Revenue and Customs around £100 million to hire 1,265 new staff to combat fraud in the support packages, including the furlough and self-employment support schemes.

Helen Dickinson, chief executive of the British Retail Consortium, said: “We hope the loan scheme will play an important role in addressing the cash flow challenges that many firms are facing.

“But it is vital that the aspirations of the Chancellor are met by action from commercial lenders to ensure that this all important finance reaches its destination quickly.”

Suren Thiru, the head of economics at the British Chamber of Commerce, said: “The acid test for the new scheme will be whether it is able to support the recovery by getting credit flowing to the firms who most need it.

“The scheme must be right from day one to ensure that businesses and banks can use it to help SMEs return to growth. Businesses will need an approach to operation of the new scheme that is clear, consistent and considerate to the impact of the pandemic on their financial position.”

Source: Shropshire Star

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Government launches £330bn coronavirus business loan scheme

The government has launched the first stage of a £330bn loan guarantee scheme for businesses, to help small and medium-sized firms borrow up to £5m to help them weather the impact of coronavirus.

“Any viable business” with a turnover of up to £45m will be able to apply to banks for an 12-month interest-free loan, 80 per cent of which will be guaranteed by the government under its Business Interruption Scheme, the Treasury said.

“We know that businesses are in urgent need of access to funding during these unprecedented times,” said business secretary Alok Sharma, who added that the scheme “will ensure that credit keeps flowing to where it is needed, when it is needed”.

Chancellor Rishi Sunak last week unveiled an unprecedented package of measures aimed at supporting businesses and employers struggling with the economic impact of coronavirus, including tax deferrals and an employee retention scheme.

The Treasury said this morning that further measures would be announced to ensure large and medium-sized businesses could access financing.

The Bank of England this morning announced the opening of a scheme to buy up debt known as commercial paper, issued by large businesses which had an investment-grade credit rating or similar level of financial health before the coronavirus pandemic hit.

BoE governor Andrew Bailey said the corporate financing scheme would “help businesses manage through this period of uncertainty”.

“Combined with steps taken by the government, this will help companies through this difficult time and support the needs of the people of this country,” he added.

Bailey said last week that the Bank would look at widening the financing scheme to firms with lower credit quality, or buying other financial instruments such as asset-backed commercial paper.

By Anna Menin

Source: City AM