Chancellor Rishi Sunak has today revealed a series of key changes to the Coronavirus Business Interruption Loan scheme.
While unprecedented in the amount being offered, the support plan has drawn criticism from companies struggling to access funds from the banks involved in the scheme.
In an announcement today, Sunak said the requirement for banks to first assess whether SMEs are eligible for other lending options will be removed, in a bid to speed up the process and cover more claims.
Speeding up the process
The scheme was initially created to help companies that were unable to secure other funding because of the coronavirus. This new change, however, sees the loan extended to all SME businesses which have faced financial difficulty because of the pandemic.
This move aims to speed up the process of getting money to businesses in need, as banks need not spend time assessing whether applicants should be applying for another commercial loan product instead.
The change comes as the Treasury was warned this week that not doing so would lead to a huge number of insolvencies from companies who simply didn’t get funding quick enough, in the coming weeks and months.
Personal guarantees banned
Elsewhere, the chancellor has also banned lenders from requesting personal guarantees on loans under £250,000.
This will likely provide reassurance for owners of design businesses worried about their personal assets being caught up in the mission to secure commercial funding. As before, the government will act as guarantor, and will cover the first 12 months of interest.
The state guaranteeing the loans, as well as the Bank of England’s record-low base rate of 0.1%, means the rate charged for the loans are expected to stay low, however there is currently no cap on the rates banks can charge.
130,000 enquires into loans
Since being introduced initially three weeks ago in the Spring Budget statement, nearly 1,000 firms have been approved for business interruption loans totalling £90 million, according the Sunak.
However, these firms are just a fraction of the 130,000 who have so far enquired about the loan scheme. This is only expected to go up as the coronavirus crisis reaches its peak.
Also announced today was a new scheme for larger businesses, which have previously been ineligible for loans. This will allow firms to apply for loans of up to £25 million, if their turnover is between £45 and £500 million. Further details of the scheme will be announced later this month.