Chancellor steps up offer of business support as first government-guaranteed loans reach businesses in need
- £ 90million in business interruption loans approved for nearly 1,000 businesses and £ 1.9bn in corporate finance granted to businesses affected by COVID-19
- current loan program extended so more small businesses can benefit
- lenders banned from asking for personal guarantees on loans under £ 250,000
- announcement of a new program to strengthen support for large companies that are not currently eligible for loans
- Chancellor stresses important for banks to act quickly to support economy, jobs and businesses
Chancellor Rishi Sunak is taking new steps today (Friday, April 3) to support businesses hit by the coronavirus crisis by boosting business interruption loans for small businesses and announcing a new program for large businesses.
More than £ 90million in loans to nearly 1,000 small and medium-sized businesses have been approved under the government’s Business Interruption Loans (CBILS) program since its launch last week. And a government-backed program to provide finance to large businesses, run by the Bank of England, has also provided nearly £ 1.9bn in business support and an additional £ 1.6bn has been pledged. .
To maximize the support available, the Chancellor is expanding the CBILS so that all viable small businesses affected by COVID-19, not just those that are unable to secure regular business funding, are now eligible if they need to. funding to continue operating during this difficult time.
The government is also preventing lenders from asking for personal guarantees for loans under £ 250,000 and making operational changes to speed up loan approvals. The government will continue to cover the first twelve months of interest and fees.
The new Coronavirus Large Business Interruption Loan Program (CLBILS) will ensure that more businesses can benefit from government-backed support during this difficult time. It will provide an 80% government guarantee to enable banks to extend loans of up to £ 25million to companies with annual turnover between £ 45million and £ 500million. This will give banks the confidence to lend to more businesses affected by the coronavirus but to which they would not lend without CLBILS. The collateral-backed loans under CLBILS will be offered at commercial interest rates and more details on the program will be announced later this month.
The Chancellor of the Exchequer, MP Rishi Sunak, said:
We’re making great strides in providing much-needed support to businesses to help them manage their cash flow during this difficult time – with millions of pounds of loans and financing provided to hundreds of businesses across the country.
And now I’m taking further action by extending our generous loan program so that even more businesses can benefit. We have also listened to the concerns of some large businesses affected by COVID-19 and are announcing new support so they can benefit as well.
This is a national effort and we will continue to work with the financial services industry to ensure that the £ 330 billion in government support, in the form of loans and guarantees, reaches as many needy businesses as possible.
The Chancellor will meet with the managing directors of the banks next week to discuss how the programs work and make sure everyone is playing their part.
According to the latest figures from UK Finance, more than 130,000 applications have been received from companies across the country for business interruption loans. 983 businesses have been approved for financing, as banks process thousands of loan applications – and today’s changes to the program will help them approve loans for smaller businesses as quickly as possible.
Among the first companies to benefit from business interruption loans was Hartlepool-based HTES (Northern), which provides training and assessment services to the engineering, petrochemical and construction industries. The company received a loan of £ 60,000 backing the scheme, allowing it to continue operating, even though sales fell by 75%.
Brian Goodlad, Director of HTES (North) said:
We have seen a significant drop in sales after the onset of the coronavirus outbreak. The CBILS support provided by Business Enterprise Fund gives a boost to our cash flow, which ensures security and stability under very difficult circumstances.
It’s an important lifeline that will help us survive and save 15 full-time and part-time jobs.
For loans over £ 250,000, personal guarantees will be limited to only 20% of any outstanding amount on the CBILS loan after any further recovery of the assets of the business. Lenders were previously prohibited from asking business owners to put their homes in jeopardy, but today’s changes will further reassure personal property during this difficult time.
This will apply to financing already available under the program, to ensure that all business owners receive the same level of government protection.
Business Secretary Alok Sharma MP said:
The coronavirus pandemic presents a challenge for businesses like no other they have faced before and we are determined to support them during this difficult time.
The changes we are making to the Coronavirus Business Interruption Loan program will make it easier for businesses to access the loans we have put in place, helping them continue to do business and protect the livelihoods of their staff.
Last week, the Chancellor and the Governor of the Bank of England, Andrew Bailey, wrote to the banks asking them to support small and medium-sized businesses in any way they can. This included ensuring that the interest rates offered to distressed businesses are reasonable and passing the benefit of the government guarantee on to those who borrow under the coronavirus business interruption loan program.
The number of CBILS providers continues to grow and new alternative finance lenders are accredited under the program, creating more choice and diversity of offerings for small businesses. We will update this in due course.
The CLBILS program follows feedback and discussions with business groups and banks and we will continue to consult with them before details are rolled out.
Reaction of business groups
Adam Marshall, Managing Director of the British Chambers of Commerce (BCC) said:
We are delighted that the Chancellor is listening and responding to the real concerns posed by UK businesses urgently trying to access financial support.
Improvements to the Coronavirus Business Interruption Loan Program will help businesses access cash faster, and announcement of a new midsize business loan program fills a significant gap in existing support .
Chambers of Commerce will continue to work with government and banks to ensure that support reaches frontline businesses.
Dame Carolyn Fairbairn, Managing Director of the Confederation of British Industry (CBI) said:
The Chancellor’s actions are a big step forward. They will help deliver cash faster to businesses struggling to survive in the headwinds of the pandemic.
By providing more support to mid-size companies, they are supporting our largest and most iconic regional employers. These companies number in the thousands and make a huge contribution to the economy, so it’s good to see them get the support they deserve. More details and a clear timeline are still needed, but this plan is extremely welcome.
The CIBL regime reforms for businesses up to £ 45million will simplify the process and make it easier for loans to reach small businesses looking for cash. At the same time, banks are working at breakneck speed to provide loans to businesses that need it most.
Each week brings unprecedented levels of economic support and it is heartening to see the government step in where urgent help is needed. This will need to continue as the challenges of this health and economic crisis unfold.
Mike Cherry, National President of the Federation of Small Businesses (FSB) said:
The most immediate problem that threatens the survival of millions of small businesses and the self-employed is cash depletion. Time is running out and we therefore welcome the measures taken by the government to ensure that any viable small business that has been negatively impacted by the coronavirus can now access CBILS directly rather than being offered the standard commercial loan product first. from a bank.
The removal of personal guarantees for all business loans under £ 250,000 is also welcome. Going into debt today is a daunting prospect for many small businesses and self-employed people. We look forward to continuing our constructive engagement with the government to ensure that debt can be repaid affordably, allowing small businesses to recover from this crisis and thrive again.