The rules around who can benefit from the Government’s Covid-19 business support schemes have been changed to include companies in distress before the coronavirus pandemic, it has been announced.
The change, which went into effect from 25 September 2020, means that businesses applying for finance through the Coronavirus Business Interruption Loan Scheme (CBILS) or Coronavirus Large Business Interruption Loan Scheme (CLBILS) will “benefit from more flexibility on the date the test of whether or not their business is an ‘undertaking in difficulty’ is assessed”.
Under the previous rules, businesses had to demonstrate that they were not an ‘undertaking in difficulty’ as of 31 December 2019 to qualify for EU state aid.
According to the official definition, businesses classed as an “undertaking in difficulty” are those that “had accumulated losses greater than half of their subscribed share capital (for limited liability companies) or capital (for unlimited liability companies)” or “had entered into collective insolvency proceedings or fulfilled the criteria to be put into collective insolvency proceedings”.
Businesses in difficulty could also include those that:
- had previously received rescue aid that was yet to be reimbursed or (in the case of a guarantee, terminated)
- had received restructuring aid and were still under a restructuring plan
- had (where the undertaking is not an SME) fallen below the required solvency ratios (see further below) for the previous two years.
However, the new rules mean that assessments will be determined at the date of application, regardless of whether the business in question was defined as being in difficulty on or before 31 December 2019.
The British Business Bank (BBB), who administers the coronavirus loan schemes, said the flexibility also means that “businesses can take action to convert their debt (for example, in the form of loan notes) to shares (equity) in order to qualify for the schemes, giving them the option to restructure their finances before application so they may become eligible”.
According to the latest statistics, coronavirus finance schemes have now delivered over £57 billion in affordable loans to businesses across the UK.
For more business support, including advice on grant funding, investment, and corporate finance, please get in touch with our expert team today.