Government revamps Coronavirus business loan to improve access
The Government has reformed the business interruption loan to make it easier for small and medium sized businesses to access finance.
Following criticism that the Coronavirus Business Interruption Loan Scheme (CBILS) was not achieving expected take up by business the Government has sought to make changes to improve access. These reforms have focused on smaller businesses as well as a creating a new avenue of funding for larger businesses offering new government-backed loans of up to £25m to firms with revenues of between £45m and £500m.
The major updates to the loan scheme include:
Under the scheme, lenders will no longer seek personal guarantees of any form for facilities below £250,000
For any loan facilities above £250,000, banks may continue to seek personal guarantees from company directors, at their lender’s discretion, however these will now exclude the Principal Private Residence (PPR) and any recoveries are to be capped at a maximum of 20% of the outstanding balance of the CBILS facility.
Businesses are able to approach multiple lenders, meaning that potential borrowers should be able to approach other banks beyond their existing one.
The British Business Bank has said that access to the scheme is now open to smaller businesses facing cashflow difficulties who previously would not have been eligible for CBILS because they met the requirements for an alternative standard commercial facility.
There is now a new loan facility for larger businesses with revenues between £45m and £500m, with new government-backed loans of up to £25m.
These updates to the CBILS are welcome, however in the previous iteration poor implementation of the scheme meant that many businesses from the tech sector who were seeking funds faced difficultly accessing the scheme.
While these improvements are welcome there remain questions around how suitable the loan scheme is for start-ups as well as SMEs in the tech sector who require loans above £250,000, but do not have significant assets against which to secure the loan.
This is a particular risk area as many SMEs in the tech sector do not hold large amounts of assets against which to secure loans, with the value of their business held in intellectual property and human capital and operating using rented office space and software purchased through subscriptions.
techUK will continue to examine the usefulness of the CBILS scheme for the sector and will relay to the Government where further improvements may need to be made.
If you have any specific questions regarding the CBILS or have had issues accessing a loan, please contact Neil Ross.
For further information and support programmes from techUK relating to COVID-19 please visit our COVID-19 information hub.
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