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Ban on dividend payouts for large firms using Coronavirus Loan

Government extends maximum loan size available through the Coronavirus Large Business Interruption Loan Scheme from £50 million to £200 million and imposes key borrowing restrictions.

Ban on bonuses & dividends for large firms utilising loans

In an update to the Coronavirus Large Business Interruption Loan Scheme published today a business borrowing more than £50m has new restrictions imposed on it during the period of the loan:

– Ban on dividend payments, unless already agreed upfront

– No bonuses

– Limits on share buy-backs, borrowers agree any share buybacks

– No pay rises to senior members of staff, this includes board members. Any pay rises have to be declared before loan is taken out, they need to be in keeping with similar payments made in the preceding 12 months AND not have a material negative impact on the borrower’s ability to repay the loan

Increased loan sizes to support big businesses in troub

From May 26th 2020 the maximum loan size businesses can apply for increases from £50m to £200m to help big companies, such as those in the leisure industry, to have the finance they need to manage cashflow requirements during Coronavirus. The government is yet to announce any changes to the Coronavirus Small Business Interruption Loan Scheme. John Glen, the Economic Secretary to the Treasury, said: “We’re determined to support businesses of all sizes throughout this crisis and our loans and guarantees have already provided over £32 billion to thousands of firms. Today we’re increasing the maximum loan to £200 million to make sure companies get the help they need.”

Government figures report that businesses have benefited from over £32 billion in loans and guarantees to support their cashflow during the crisis. This includes 268,000 Bounce Back Loans worth £8.3 billion, 36,000 loans worth over £6 billion through the Coronavirus Business Interruption Loan Scheme, and £359 million through the Coronavirus Large Business Interruption Loan Scheme, alongside £18.7 billion through the CCFF.

Borrowers under CLBILS will be able to borrow up to 25% of turnover, up to a maximum of £200 million, lenders who wish to offer larger loans will need to undergo further accreditation checks.

Further Information

Author: Cherie-Anne Baxter

Date: 19th May 2020 10:38am

Return to Finance during coronavirus

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