Government loan support: Analysis of the available schemes

Elisabeth Heide, senior associate at Taylor Wessing, provides an analysis of the government loans that are available to hotel businesses for financial support during the coronavirus crisis.

Some countries in Europe are permitting the reopening of hotels to paying guests from May and although we are not expecting to see that happening for the UK hotels as yet, there is no doubt that reopening hotels will be of a challenge both from an economical and operational perspective, but there is support.

The government has set up several loan schemes which have been launched over the past few weeks and accessible for businesses that need help to survive the consequences of the coronavirus pandemic. Our banking team has prepared an in depth analysis of such schemes, read it here.

In summary, the loan schemes that may be of interest for hotel businesses are:

  • Coronavirus Large Business Interruption Loan Scheme – designed for businesses with an annual turnover above £45m. Loan amounts available are either (i) up to £25m or (ii) up to £50m, depending on the turnover of the business. 
  • Coronavirus Business Interruption Loan Scheme – designed for SMEs with group annual turnover of no more than £45m looking to raise up to £5m.
  • Bounce Back Loan Scheme – designed for small businesses looking for loans between  £2,000 and £50,000.

Coronavirus Large Business Interruption Loan Scheme 

Businesses with an annual turnover between £45m and £250m can borrow up to £25m and businesses with an annual turnover above £250m are able to borrow a maximum amount of £50m. Lenders will not allow businesses to borrow more than either double their most recent annual wage bill or 25 per cent of the company’s total turnover for the most recent year available. The business will remain liable for the total amount they borrow and for all interest and fees charged by the lender (including initial fees and interest for the first 12 months). Maximum loan term is three years and personal guarantees may be required by lenders for loans above £250,000. 

To be eligible to apply businesses must:

  • Have UK-based business activity.
  • Have an annual turnover of more than £45m.
  • Be able to self-certify that they have been adversely affected by the COVID-19 pandemic.
  • Have a borrowing proposal which, the lender would consider viable. Lender must believe that the loan will enable the business to trade out of any short-to-medium cash flow difficulty and if the facility is granted, the business is not expected to go out of business in the short-to-medium term.

Businesses must apply for the scheme through British Business Bank accredited lenders.

Coronavirus Business Interruption Loan Scheme

Businesses can borrow up to £5m for a term of up to six years. No initial fee is chargeable to the borrower and the government will pay all interest on the loan for the first 12 months. Businesses will be responsible for all further interest payments and for repayment of the loan at the end of the term. Personal guarantees cannot be requested for loans of less than £250,000, but lender may be required for larger loans. 

To be eligible to apply businesses must:

  • Not have been in financial difficulty as at 31 December 2019 and cannot have been loss making at that time.
  • Be able to demonstrate that they will be a viable business once the pandemic is over.

Application for this loan should be made through accredited lenders, a list of which can be found on the British Business Bank’s website. 

Bounce Back Loan Scheme

The loan scheme is to provide rapid access to loans to help them survive the pandemic crisis.

Small businesses will be able to by way of a standardised, online application process. Successful applicants will receive their loans within days of applying and the borrower will not be required to make any repayments during the first 12 months. Specific eligibility criteria have not yet been disclosed, although it is assumed that they will be kept to a minimum given the target borrower group and the online standardised application process.

Be in the know.

Subscribe to our newsletter »