Chancellor makes improvements to coronavirus business loan scheme

Apr 3, 2020 8:15 PM ET

Chancellor Rishi Sunak has made further improvements to the new Coronavirus Business Loan Interruption Scheme (CBILS).

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.

Banks will now arrange these loans as the default option, rather than first trying to arrange standard commercial loans.

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. It will provide a government guarantee of 80% to enable banks to make loans of up to £25m to firms with an annual turnover of between £45m and £500m. 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.

In a statement, the All-Party Parliamentary Group on Fair Business Banking said, “We do need to make sure that access to the scheme is widened to other lenders, such as OakNorth, Aldermore, Fintech and alternative, non-bank lenders. The APPG on Fair Business Banking will continue to work closely with businesses and banks to make sure that the Chancellor’s scheme is a success and meets with its objective of delivering world-leading financial support to get save hundreds of thousands of jobs and businesses.

“It is very important that businesses make full use of the other measures that the Chancellor has announced including non-repayable grants that can reimburse businesses for up to 80% of the salaries of employees, a similar scheme for the self-employed, business rates grants, HMRC Time to Pay scheme for VAT and PAYE, three month payment holidays for residential and buy-to-let mortgages and commercial loans, the opportunity to renegotiate lease payments, a three month freeze on loans and credit cards payments, a £500 interest free overdraft and the cancellation of increased rates due for larger overdrafts on personal accounts.

“With these changes, the onus is now on the banks to ensure that the scheme is delivered swiftly and fairly, which must include a fair reversion rate after the interest free period. Likewise, lenders must look at offering full payment holidays and a freeze on interest payments for commercial customers. All of society is bearing the brunt of this crisis, and everyone must take on a fair element of risk in order to get through this.”

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