Govt extends coronavirus loan scheme to all SMEs

Govt extends coronavirus loan scheme to all SMEs
Chancellor of the Exchequer, Rishi Sunak

Chancellor Rishi Sunak is extending the coronavirus loan scheme for small and medium size businesses while also introducing another scheme to offer support for larger firms affected by the current crisis.

The government’s Coronavirus Business Interruption Loan Scheme (CBILS) was originally launched for firms that were unable to secure regular financing during the crisis.

But the chancellor last night (April 2) extended CBILS to all viable small and medium businesses that have faced financial difficulty due to coronavirus, meaning they no longer have to be rejected by their bank first.

The CBILS allows UK-based small businesses with revenues of less than £45m to apply for loans of up to £5m.

According to the Treasury, more than £90m of loans to nearly 1,000 SMEs have been approved under the scheme since its launch last week.

But this is expected to increase in the coming weeks as banks get used to the new system and are able to hand out more loans.

The chancellor also announced a scheme for larger companies.

The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will offer loans of up to £25m to firms with an annual turnover of between £45m and £500m, which come with a government guarantee of 80 per cent.

Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced later this month.

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

“And now I am taking further action by extending our generous loan scheme so even more businesses can benefit. We have also listened to the concerns of some larger businesses affected by Covid-19 and are announcing new support so they can benefit too.

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

The government also stopped lenders from requesting personal guarantees for loans of less than £250,000 and made operational changes to speed up lending approvals. 

For loans worth more than £250,000, personal guarantees will be limited to just 20 per cent of any amount outstanding on the CBILS lending after any other recoveries from business assets. 

Lenders were already prohibited from asking business owners to put their house on the line, but the Treasury said this change “will provide further reassurance regarding personal assets during this difficult time”.

According to the latest figures from UK Finance, there have now been more than 130,000 enquiries from firms for business interruption loans. 

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