Update – Government strengthens support for businesses

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The Chancellor Rishi Sunak has announced an update to the support programme that the UK Government is providing for businesses affected by the Coronavirus situation.

Key changes* announced 3 April include:

  • £90 million of business interruption loans approved for nearly 1,000 firms and £1.9 billion corporate finance provided to firms hit by COVID-19
  • current loan scheme extended so more small businesses can benefit
  • lenders banned from requesting personal guarantees on loans under £250,000
  • new scheme announced to bolster support for larger firms not currently eligible for loans
  • Chancellor emphasises importance of banks moving quickly to support the economy, jobs and businesses

To maximise the support available, the Chancellor is extending the Coronavirus Business Interruption Loan Scheme (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.

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.

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 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.

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*Source: https://www.gov.uk/government/news/chancellor-strengthens-support-on-offer-for-business-as-first-government-backed-loans-reach-firms-in-need