Rishi Sunak says lenders must ‘do their part’ to aid small businesses during Covid-19 crisis The chancellor, Rishi Sunak, has revised the coronavirus business interruption loan scheme announced last month. Photograph: 10 Downing Street/Crown copyright/Pippa Fowles/PA The chancellor, Rishi Sunak, has banned banks from requesting personal guarantees for emergency loans to small businesses amid growing…
Rishi Sunak says lenders must ‘do their part’ to aid small businesses during Covid-19 crisis
The chancellor, Rishi Sunak, has banned banks from requesting personal guarantees for emergency loans to small businesses amid growing government concern that lenders have been slow in meeting demands for help.
With the rapid increase in the number of universal credit claims suggesting many small companies have already collapsed since the economy was locked down, Sunak combined a new package of support for business with a warning to banks that they had to move more quickly.
Sunak announced his £330bn coronavirus business interruption loan scheme (CBILS) – under which the government underwrites loans to companies – just over two weeks ago, but has now been forced to admit that support was not arriving quickly enough and was failing to reach all the companies that required it.
The chancellor said that under the revised plan:
Lenders would be banned from requesting personal guarantees – which mean borrowers often have to put their homes on the line – on loans under £250,000.
The loan scheme would be extended so that it covered all small companies affected by Covid-19 and not just those unable to get commercial funding.
There would be a new scheme to bolster support for larger firms not currently eligible for loans, under which the government would provide a guarantee of 80% so that banks could make loans of up to £25m to firms with an annual turnover of between £45m and £500m.
The Treasury said the chancellor would be speaking to bank chief executives next week to discuss how the schemes are working and “ensure everybody is playing their part”.
Sunak, the Bank of England governor, Andrew Bailey, and the interim head of the Financial Conduct Authority, Christopher Woolard, told UK banking chiefs last month to take “all action necessary” to make sure government-backed loans were benefiting households and businesses as planned.
The chancellor said: “This is a national effort and we’ll continue to work with the financial services sector to ensure that the £330bn of government support, through loans and guarantees, reaches as many businesses in need as possible.”
While the government’s official line is that great progress is being made in providing much-needed support to businesses that have been badly affected by the closure of large chunks of the economy, the chancellor has listened to the employers’ bodies calling for the scheme to be more comprehensive, less bureaucratic and speedier.
Adam Marshall, director-general of the British Chambers of Commerce, said: “We’re pleased that the chancellor is listening and responding to the real-world concerns posed by firms across the UK who are urgently trying to access financial support.”
Mike Cherry, national chair of the Federation of Small Businesses, said: “The most immediate issue threatening the survival of millions of small businesses and the self-employed is severely depleted cash flow. Time is of the essence and therefore we welcome government action in ensuring that any viable small business that has been negatively impacted by the coronavirus can now directly access CBILS rather first being offered a bank’s own standard commercial lending product.
“Removing personal guarantees for all commercial loans below £250k is also very welcome. Taking on debt at the current time is a daunting prospect for many small businesses and the self-employed.”
Sunak said that since the CBILS had been announced £90m of business interruption loans had been approved for nearly 1,000 firms and £1.9bn corporate finance provided to firms hit by Covid-19.
“We are making great progress on getting much-needed support out to businesses to help manage their cashflows during this difficult time – with millions of pounds of loans and finance being provided to hundreds of firms across the country,” the chancellor said.
“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.”
Gerard Lyons, senior fellow at the Policy Exchange thinktank and a policy adviser to Boris Johnson when he was London’s mayor, said: “In a fast-moving environment it should be no surprise that policy has to continue to evolve. Speed, scale and simplicity are of the utmost importance to follow through on the measures to date. In particular banks either must engage 100% in the process or be bypassed with the government giving grants to firms to ensure they survive.”