The automotive sector was given a massive boost this morning with the news that the government had made major revisions overnight to the Coronavirus Business Interruption Loan Scheme.
After receiving what accountants and business advisers UHY Hacker Young called ‘significant feedback’ from industry bodies such as the RMIF and many SME businesses whose turnover exceeds the initial £45m eligibility threshold, loans of up to £25m will now be made available for businesses whose turnover is between £45m and £500m.
UHY Hacker Young partner David Kendrick, who is head of the company’s automotive division, said: ‘This is welcome news for the automotive sector with a huge number of businesses now eligible to look for cashflow support during these challenging times.
‘The finer detail has yet to be released, however the initial lending criteria has also been relaxed for businesses under the £45m limit, with over 130,000 applications and only 1,000 approved loans granted to date.’
Chancellor Rishi Sunak has instructed banks to make the loan application more straightforward with immediate effect, as well as remove some of the initial criteria that they were adding around guarantees and eligibility. For example, lenders are now banned from requesting personal guarantees on loans of under £250,000. The government adds that for loans of more than £250,000, personal guarantees will be limited to 20 per cent of any amount outstanding on the Coronavirus Business Interruption Loan Scheme lending after any other recoveries from business assets.
It has been acknowledged that businesses will fail unless this money is made available to them quickly, said UHY Hacker Young.
Kendrick added: ‘This morning’s announcement will be extremely well received by a huge number of our clients and contacts who have been working on cashflow forecasts, assessing how significant this lockdown and interruption is to their cash burn.
‘It still remains unknown as to how long this will go on for, but we would encourage everyone to consider the governmental support during these times, regardless of your funding position, as ultimately “cash is king”.
‘For anyone who would like a free confidential discussion regarding their requirements and how to access some of these funds available, please feel free to get in touch with any of the UHY automotive team.’
A significant proportion of car retailers are completely closed with no income at all for their businesses as they stand, with others having limited service availability for key workers.
UHY Hacker Young added that while the furlough scheme was welcomed to allow employees to be retained on a paid basis, subsidised/covered by the government, those businesses had huge overheads that couldn’t just be switched off overnight.
It said: ‘Cashflow management both during the lockdown and also when normal business resumes will be very important. Let’s not forget it’s not only the cash burn over the next couple of months, it’s the impact on the wider economy that could impact the sector as we head into the latter parts of 2020.
We can only hope that the pent-up demand due to lockdown causes an immediate upside when the doors properly reopen to assist the retailers and manufacturers.’