Wayne Thomas rounds up the changes to CBILS announced by the Chancellor on 3 April 2020.
As a new scheme, it seemed beset with difficulties. Banks were required to assess the loans on normal commercial terms, could take personal guarantees and the government guaranteed only 80% of the loan meaning the banks were left with a 20% exposure. As a result, it seems very few businesses have been able to access the CBILS loan scheme. The figures from UK Finance today (3 April) confirm that of the 130,000 enquiries across the country for CBILS, only 983 businesses have had finance approved to date. But banks are processing thousands of applications, and hopefully the changes the Chancellor has announced today will help the banks approve loans for the smallest businesses as quickly as possible.
Changes announced 3 April:
- current loan scheme extended so that all viable small businesses affected by Covid-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance
- lenders banned from requesting personal guarantees on loans under £250,000 and making operational changes to speed up lending approvals
- for loans over £250,000 personal guarantees will be limited to 20% of any amount outstanding on the CBILS lending after any recoveries from business assets. Lenders were already prevented from asking business owners to put their homes on the line, but this change provides reassurance regarding other personal assets
- new scheme announced to bolster support for larger firms not currently eligible for loans – CLBILS- Coronavirus Large Business Interruption Loan Scheme. 80% government guarantee will enable banks to make loans of up to £25m to firms with annual turnover between £45m and £500m. More details on this scheme will be announced later this month
- Chancellor emphasises importance of banks moving quickly to support the economy, jobs and businesses
Wayne Thomas, Partner at Bates Weston comments:
“This is much needed support and we hope that this will allow SMEs to get access to cash more quickly. It seems that these changes will allow businesses to directly access CBILS rather than being offered a lender’s standard commercial product first. We are able to help our clients prepare the financial information they may need to approach their lenders to smooth the application process. We look forward to seeing the details on the CLBIL Scheme, as support for mid-tier companies is also significant for our regional employers. “