Chancellor announces further COVID-19 support for businesses
More businesses will be able to access financial support during the coronavirus lockdown after the Chancellor announced a wider package of measures to assist struggling companies.
The move will enable larger firms with turnovers as high as £500 million to access support, while opening up the availability of state-backed cash to smaller companies.
And the Treasury has confirmed the imposition of new rules on lenders in a bid to ensure money gets to business owners faster and with less personal risk involved.
The Treasury has confirmed:
– The introduction of a new Coronavirus Large Business Interruption Loan Scheme (CLBILS) providing a Government guarantee of 80% to enable loans of up to £25 million for firms with an annual turnover of between £45 million and £500 million
– A ban on banks being able to demand debt-risking personal guarantees on loans of less than £250,000 to speed up the process of lending and reduce financial risk for applicants
– An expansion of the already-running Coronavirus Business Interruption Loan Scheme (CBILS) to allow “viable” small businesses affected by Covid-19 to apply, no longer limiting it to those unable to secure commercial financing
– More than £90 million has been paid to 983 small and medium sized businesses, with £1.9 billion now in the accounts of larger firms
– Chancellor Rishi Sunak will meet with chief executives of UK banks to discuss the implementation of the schemes next week.
Sunak said: “We are making great progress on getting much-needed support out to businesses to help manage their cash flows during this difficult time – with millions of pounds of loans and finance being provided to hundreds of firms across the country.
“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.
“This is a national effort and we’ll continue to work with the financial services sector to ensure that the £330 billion of government support, through loans and guarantees, reaches as many businesses in need as possible.”
More than £90 million of loans to nearly 1,000 small and medium sized firms have been approved under CBILS since its creation last week, the Treasury confirmed.
And a Government-backed scheme to provide financing to larger companies, being operated by the Bank of England, has also provided almost £1.9 billion of support to firms, with a further £1.6 billion committed.
It comes after Business Secretary Alok Sharma this week warned banks it would be “completely unacceptable” if they were found to be “unfairly refusing funds to good business in financial difficulty”, especially following the taxpayer-funded 2008 bailouts after the financial crash.
The Government has now introduced measures to ensure financial support is readily available, including for larger businesses.
Those taking part in CLBILS will see 80% of their loan guaranteed by the Government but, unlike the scheme for small to medium sized businesses, they will not get a 12-month holiday on paying the interest and fees involved.
For small business loans of more than £250,000, personal guarantees will be limited to just 20% of any amount outstanding on the lending after any other recoveries from business assets, with lenders continuing to be prohibited from asking business owners to put their house on the line.
Sharma said: “The changes we are making to the Coronavirus Business Interruption Loan Scheme will make it easier for business to access the lending we have put in place, helping them to continue trading and protect the livelihoods of their staff.”
Labour welcomed the measures but accused the Government of being “behind the curve” when implementing support measures.
Shadow chancellor John McDonnell said: “I welcome this move but the Chancellor cannot keep being behind the curve in supporting our economy.
“There remain huge gaps in support for employees and self-employed that must be addressed immediately if people are to avoid facing serious hardship in this crisis.”
Business bodies, including the British Chambers of Commerce, the Confederation of British Industry (CBI) and the Federation of Small Businesses (FSB), said the measures would assist those impacted by the downturn brought about by Covid-19.
CBI director general Dame Carolyn Fairbairn said: “The Chancellor’s measures are a big step forward.
“They will help deliver cash faster to firms battling for survival in the headwinds of the pandemic.”
Mike Cherry, the FSB’s national chair said: “Removing personal guarantees for all commercial loans below £250K is very welcome.
“Taking on debt at the current time is a daunting prospect for many small businesses and the self-employed.”
Work on delivering support for charities is ongoing, the Treasury confirmed, while the Department for Transport is understood to be in talks with airlines about bespoke help.