The Chancellor Rishi Sunak has today (3rd April) revealed the much needed overhaul to the Coronavirus Business Interruption Loan Scheme (CBILS) including an introduction of a new Coronavirus Large Business Interruption Scheme (CLBILS).
The temporary loan scheme originally announced by the Chancellor on 23rd March has not been a success o date with many small businesses struggling to access the much needed funds. At the time of writing just 983 companies from 130,000 applicants have had their loans approved. This has prompted the Chancellor to take steps to improve this process. He has announced:
A significant update to the eligibility criteria to cover “all viable business affected by Covid-19”
Prior to today’s announcement the scheme was available only to small businesses that were unable to secure regular commercial financing. This caused a degree of difficulty with the banks offering normal commercial products to customers.
Under the updated scheme all viable small businesses will be eligible for financial support under the scheme if needed in order to remain operational during the crisis. With condition that businesses must be able to self certify that they have been adversely impacted by the pandemic.
Removal of requirement for Personal guarantees
The chancellor has confirmed that lenders are now prohibited from requesting personal guarantees on loans up to £250,000.
Furthermore for any loans of more than £250,000 personal guarantees will be limited to 20% of any amount outstanding on the CBILS lending after any other recoveries from business assets.
The chancellor once again highlighted that a principal private residence cannot be taken as security to support a personal guarantee or as security for a CBILS backed facility. This is hoped it will allow businesses with annual turnover between £45m and £500m to access financial support of up to £25 million.
New loan scheme for mid-sized companies
The chancellor in identifying a gap in support has introduced a new hybrid style loan product to support those businesses who fall between the definition of small and large businesses with the new Coronavirus Large Business Interruption Loan Scheme (CLBILS), operated by the Bank of England.
Under the scheme lenders can issue commercial interest rate loans of up to £25 million to firms with annual turnovers of between £45m and £500m. The move is intended to encourage banks to extend credit to businesses with confidence, having the assurance that 80% of loans will be backed by the government.
At the moment the information is thin on the ground and we will provide update as soon as possible.
As things stand the Chancellor will be meeting with bank chief executives next week to discuss operational pain points to ensure that as many businesses as possible can access to the schemes, as quickly as possible.
If you have any questions or concerns about the above please do contact your usual partner or manager at NR Barton.
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