Coronavirus: Emergency business loan scheme revamped after criticism

Andrew Cummings
April 3, 2020

The chancellor has also banned lenders from asking personal guarantees for loans. We have also listened to the concerns of some larger businesses affected by COVID-19 and are announcing new support so that they can benefit too.

This is a national effort and we'll continue to work with the financial services sector to ensure that the £330 billion of government support, through loans and guarantees, reaches as many businesses in need as possible.

The changes to the business interruption loan scheme will mean more businesses are able to access financial support during the lockdown.

The Treasury insisted on Wednesday that "hundreds" of loans had already been issued through the scheme.

Business Secretary, Alok Sharma, said the changes to the scheme would make it easier for firms to access loans.

The revamped scheme will be offering government-backed loans of as much as £25m to companies with revenues of between £45m and £500m.

The coronavirus loans scheme is created to offer companies up to £5 million interest free for the first year to help shore up their businesses.

"The government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals", HM Treasury announced on Friday.

We are making great progress on getting much-needed support out to businesses to help manage their cashflows during this hard time - with millions of pounds of loans and finance being provided to hundreds of firms across the country.

The Chancellor Rishi Sunak has this morning beefed up the government's support measures for smaller businesses after severe criticism of his previous announcement last week revealing its Coronavirus Business Interruption Loans Scheme or CBILS.

The Chancellor will be speaking to bank Chief Executives next week to discuss how the schemes are working and ensure everybody is playing their part. The government will continue to cover the first 12 months of interest and fees.

In fact, this demand for personal guarantees, which so alarmed the owners of small businesses desperate for the help, was actually stipulated by HM Treasury and its partner the British Business Bank: the original documentation for the scheme said the lending banks had to use their "normal lending criteria".

A personal guarantee places the assets of the business owner or directors at risk if they default on the loan and the business does not have enough assets for the lender to recover the debt. In a statement the bank, which hopes to be onboarded to the scheme in the coming weeks, also called on the government for an emergency eight-week cashflow grant for "previously viable businesses" as well as "simplifying the CBILS".

Banks have come under heavy fire for demanding personal guarantees from business owners that could see their assets being seized, while others have sought to apply high interest rates once the interest rate-free initial period ends.

By providing more support for mid-tier companies, they are backing our most significant and iconic regional employers.

"It was clear that those viable businesses, who were required to be offered under the terms of the scheme commercial lending under commercial terms, felt aggrieved that they were not given access to the scheme and therefore the change gives the scheme to all businesses who are capable of repaying debt after this crisis is over".

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