Chancellor unveils new measures to SME loan scheme

Chancellor of the exchequer Rishi Sunak has unveiled a major overhaul to his previously announced SME loan scheme.

Initially, the Coronavirus Business Interruption Loan Scheme (CBILS) was aimed at businesses unable to secure regular commercial financing as the virus took its toll on the UK’s economy.

However, according to Sky News the scheme has been extended to small and medium sized businesses which have experienced financial difficulty during the Covid-19 pandemic.

Additionally, lenders will no longer be able to request personal guarantees for loans under £250,000. The government also said it has made operational changes in a bid to speed up loan approvals.

Sunak has also announced the Covid Large Business Interruption Loan Scheme, with companies that have a turnover between £45m and £500m able to apply for loans of up £25m.

Sunak told Sky News: “We are making great progress on getting much-needed support out to businesses to help manage their cashflows during this difficult time – with millions of pounds of loans and finance being provided to hundreds of firms across the country.”

He added: “And now I am taking further action by extending our generous loan scheme so even more businesses can benefit. We have also listened to the concerns of some larger businesses affected by Covid-19 and are announcing new support so they can benefit too.”

British Chambers of Commerce (BCC) director general Adam Marshall said he “welcomed” Sunak’s announcement on measures to boost financial support for businesses affected by Coronavirus, and added: “We’re pleased that the chancellor is listening and responding to the real-world concerns posed by firms across the UK who are urgently trying to access financial support.

“Improvements to the Coronavirus Business Interruption Loan scheme will help firms get access to cash more quickly, and the announcement of a new loan scheme for mid-sized companies closes a significant gap in existing support.”

He continued: “Chambers of Commerce will continue to work with the government and the banks to ensure that support reaches businesses at the front line.”

The British Business Bank (BBB) originally opened applications for the CBILS on Monday (23 March), and claimed the loan can provide facilities of up to £5m for smaller businesses across the UK which are “experiencing lost or deferred revenues”, leading to disruptions to their cashflow.

However, banks recently came under fire over the government-backed emergency loans, after requesting business owners to sign for a personal guarantee.

The BBB said the loan would come at the “discretion of the lender”, and added that the borrower “always remains 100% liable for the debt”, as opposed to the banks or the government, which previously said it would underwrite 80% of the loans’ value.

According to the BBC, the loan leaves business owners at risk as banks can come after the personal property of the business owner if they cannot afford to pay the debts. This reportedly won’t include main homes, but banks could claim other assets including personal savings, shares or holiday homes.

Barclays reportedly told its customers that in order to access the funding they would need to sign a personal guarantee. Additionally, HSBC told the BBC it will require a form of personal guarantee for loans over £100,000.

It comes after Sunak announced the CBILS in his maiden Budget speech to support up to a further £1bn lending to SMEs and a £2.2bn grant scheme for small businesses.