Positive Changes to Government Backed Loans for Businesses

Yesterday the Chancellor of the Exchequer, Rishi Sunak, announced further measures to support businesses impacted by the Coronavirus crisis.  These measures include bolstering business interruption loans for small businesses along with announcing a new scheme for larger firms.

Many businesses were having difficulty accessing the Coronavirus Business Interruption Loan Scheme (CBILS), with only 1,000 approved applications from over 130,000 enquiries.Small business owners complained about struggling with onerous eligibility criteria to access the loans, facing interest rates of up to 30% and being asked to make unreasonable personal guarantees.

Mr Sunak has extended the scheme to ensure that all viable small businesses affected by the current crisis, and not only those unable to secure normal commercial financing, will now be eligible for support.  Furthermore the government is stopping lenders from requesting personal guarantees for loans of under £250,000 and are making operational changes to speed up lending approvals. The government will continue to cover the first twelve months of interest and fees.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

• Recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied; and
• A Principal Private Residence cannot be taken as security to support a personal guarantee or as security for a CBILS backed facility.

The new measures announced by Mr Sunak should help lenders approve loans for the smallest businesses as quickly as possible.

Photo by Brian McGowan on Unsplash

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.