Government Announces a New Scheme for Larger Companies

Government Announces a New Scheme for Larger Companies

The Chancellor Rishi Sunak has taken further action today to support firms affected by the coronavirus crisis by bolstering business interruption loans for small businesses and announcing a new scheme for larger companies.

More than £90 million of loans to nearly 1,000 small and medium sized firms have been approved under the government’s Coronavirus Business Interruption Loan Scheme (CBILS) since its launch last week. And a government-backed scheme to provide financing to larger companies, being operated by the Bank of England, has also provided almost £1.9 billion of support to firms and a further £1.6 billion has been committed.

To maximise the support available, the Chancellor is extending the CBILS so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance to keep operating during this difficult time.

The government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals. The government will continue to cover the first twelve months of interest and fees.

The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will ensure that more firms are able to benefit from government-backed support during this difficult time. It will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million. This will give banks the confidence to lend to more businesses which are impacted by coronavirus but which they would not lend to without CLBILS. 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.

“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,” Chancellor of the Exchequer, Rishi Sunak MP, said.

There have now been over 130,000 enquiries from businesses across the country for business interruption loans, according to latest figures from UK Finance. Some 983 businesses have had finance approved, while banks are processing thousands of loan applications – and scheme changes made today will help them approve loans for the smallest businesses as quickly as possible.

The first firms to receive business interruption loans included Hartlepool-based H.T.E.S (Northern), which provides training and assessment services to the engineering, petrochemical and construction sectors. This company received a £60,000 loan backed by the scheme, enabling it to continue to operate, even though sales have dropped by 75%. “It is an important lifeline that will help us survive and safeguard 15 full and part-time jobs,” Brian Goodlad, Director of H.T.E.S (Northern) said.

“The most immediate issue threatening the survival of millions of small businesses and the self- employed is severely depleted cash flow,” Mike Cherry, National Chair of the Federation of Small Businesses (FSB) said. “Time is of the essence and therefore we welcome government action in ensuring that any viable small business that has been negatively impacted by the Coronavirus can now directly access CBILS rather first being offered a bank’s own standard commercial lending product.”

For loans over £250,000, personal guarantees will be limited to just 20% 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 today’s changes will provide further reassurance regarding personal assets during this difficult time. This will apply to finance already offered under the scheme, to ensure that all business owners receive the same level of government protection.

“Removing personal guarantees for all commercial loans below £250K is also very welcome,” Mike Cherry said. “Taking on debt at the current time is a daunting prospect for many small businesses and the self-employed. We look forward to continuing our constructive engagement with government to ensure that debt can be repaid in an affordable way that allows small businesses to recover from this crisis and to thrive again.”

Last week, the Chancellor and the Governor of the Bank of England, Andrew Bailey, wrote to banks asking them to support small and medium-sized enterprises in any way they can. This included ensuring interest rates offered to struggling businesses are reasonable and to pass on the benefit of the Government guarantee to those borrowing under the Coronavirus Business Interruption Loan Scheme.

The number of providers of the CBILS continues to grow and new alternative finance lenders are being accredited under the scheme creating more choice and diversity of supply for smaller businesses.

Dame Carolyn Fairbairn, Director-General of the Confederation of British Industry (CBI), believes that the Chancellor’s measures are “a big step forward” as they will help deliver cash faster to firms battling for survival in the headwinds of the pandemic. “By providing more support for mid-tier companies, they are backing our most significant and iconic regional employers,” she said. “These firms number in the thousands and make a huge contribution to the economy, so it’s good to see them getting the support they deserve.”

Image: Seventyfour / Adobe Stock

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Sebastien Fontenoy holds an MBA degree and writes about entrepreneurship, startups and finance.