We were expecting the Chancellor, Rishi Sunak, to hold this evening’s press conference. However, the Health Secretary instead took the briefing. Overnight, there were however amendments to the Coronavirus Business Interruption Loan Scheme (CBILs).
The changes are very much welcome and actually give bank firm guidance on how to approach matters, where previously banks had been exercising caution with no real guidelines to work within, which was leading to differing approaches per bank. Prior to the below changes, only £145m of the £330bn set aside for loans has been lent. Obviously a sharp increase in the availability will need to happen to get anywhere near that figure. The changes are as follows:
- Applications will not be limited to businesses that have been refused a loan on commercial terms, extending the number who benefit. However, the Treasury has not capped the interest rates banks can charge.
- Banks will be banned from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000
- For loans of more than £250,000 a personal guarantee may still be requested, but should not be the main residence of the borrower. Also, recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
- There is no requirement to use an existing bank product/normal commercial loan first, before opting for the CBIL.
- Extra support for businesses who turnover more than £45m.
The measures have been designed to make access to the funding easier and certainly the lack of personal guarantee is a welcome move, showing some commitment from Government, rather than asking even more from the owner manager. This is still however no cap on the interest charges, despite a very cheap rate of bank borrowing.
Banks are still adjusting to these requirements and demand is likely to be high. If you would like to know more or need support in your application, please get in touch.