Orkney Islands Council Establishes Coronavirus Business Loan Scheme

Orkney Islands Council has established a council loan scheme to assist local businesses experiencing cashflow difficulties as a result of the coronavirus pandemic.

The Coronavirus Pandemic Emergency Loan Scheme will offer secured loans of between £50,000 and £100,000.

The discretionary business loans are the latest element of the Council’s £5m Coronavirus Response Fund – a fund which will initially focus on providing both business grants and loans and was established at a special meeting of the Full Council on 16 April in response to the current crisis.

The loan scheme element will be administered by the Council’s Economic Development Service.

The Grant and Loans schemes were established following engagement with business representatives. This engagement identified that businesses were asking the Council to establish a means to ease the immediate pressure from poor cash flow and the consequent risk of business failure across Orkney, with the impacts of the pandemic completely curtailing all trade in some sectors and severely limited trade in others.

This fund is intended to supplement rather than replace national schemes and as such all potential business applicants will need to show that they have taken all possible steps to reduce unnecessary expenditure and have explored all forms of Government support.

Businesses will also need to demonstrate that they have applied to the national Coronavirus Business Interruption Loan or the Coronavirus Bounce Back Loan schemes before seeking a loan from the Council.

The loan repayment term for the Council Loan Scheme will be set following an assessment of the business model and the applicant’s ability to service the loan facility.

Standard loan terms would be for a duration of up to 6 years, with an initial repayment holiday period of up to 1 year, followed by up to 5 years to repay the loan balance in full. Exceptionally, requests for a loan period of up to 10 years may be considered.

Councillor Graham Sinclair is Chair of the Council’s Development and Infrastructure Committee. He said: “This is a very concerning and uncertain time for businesses, particularly in Orkney as head into what would have been another tourist season.

“There is a great deal of support out there for businesses, but we know that not all of the existing schemes will help al businesses. The newly established loan fund offers a further option for businesses who have been unable to secure support elsewhere.

“I would encourage businesses to consider this as an option – and ensure that as many local businesses as possible survive this crisis as we look to rebuild our economy during the recovery phase.”

The £5m Coronavirus Response Fund, has been established using the following funding sources:

• Crown Estate revenue funding – £576,000.
• Renewable, Redevelopment and Regeneration Fund – £1,424,000.
• Strategic Reserve Fund – £3,000,000.

The grants element of the scheme offers:

• £5,000 per applicant for businesses employing one to five full time equivalent employees, including the owner or owners.
• £10,000 per applicant for businesses employing six to 10 full time equivalent employees, including the owner or owners.
• £15,000 per applicant for businesses employing 11 or more full time equivalent employees, including the owner or owners.

Notes to editors

United Kingdom Financial Services Regulations place restrictions on lending £25,000 or less to sole traders and partnerships/limited liability partnerships with 3 or fewer members. The Council is therefore unable to provide direct loans to sole traders/small partnerships of £25,000 or less but can assist with signposting to other loan providers who offer approved lending services.

The national Coronavirus Business Interruption Loan scheme helps small and medium-sized businesses access loans and other kinds of finance of up to £5 million. The Government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

Applications will be accepted for a loan provided the business is based in the United Kingdom and has an annual turnover of up to £45 million. Applicants will need to demonstrate that their business would be viable were it not for the pandemic and has been adversely impacted by the coronavirus. Applicants wishing to borrow £30,000 or more will also need to confirm that their business was not classed as a business in difficulty on 31 December 2019.

Businesses from any business sector can apply, except banks, insurers and reinsurers (but not insurance brokers); public-sector bodies and state-funded primary and secondary schools.

The Coronavirus Bounce Back Loan scheme helps small and medium-sized businesses affected by coronavirus (COVID-19) to apply for loans of up to £50,000. The Bounce Back Loan scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000. The Government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months.

Loan terms will be up to 6 years. No repayments will be due during the first 12 months. The Government will work with lenders to agree a low rate of interest for the remaining period of the loan. The scheme will be delivered through a network of accredited lenders.

Businesses from any business sector can apply, except banks, insurers and reinsurers (but not insurance brokers); public-sector bodies and state-funded primary and secondary schools. Businesses that have taken out a loan under the Coronavirus Business Interruption Loan scheme are also ineligible.