Emergency business loan scheme revamped after criticism - 3 April 2020

Emergency business loan scheme revamped after criticism - 3 April 2020

Emergency business loan scheme revamped after criticism - 3 April 2020

3 April 2020

Emergency business loan scheme revamped after criticism

 

There has been widespread concern, acknowledged by the government, that some of the emergency measures to provide financial assistance to businesses are not working, with fewer that 1,000 loans being approved out of 130,000 enquiries.

In response to the criticisms over the scheme the UK Government have announced that the emergency loans scheme for businesses struggling to survive amid the coronavirus will be revamped.

We understand that the UK Government are speaking to the banks, which have been are accused of taking advantage of the crisis.

The changes to the business interruption loan scheme will mean more businesses are able to access financial support during the lockdown. Previously, government-backed loans for small businesses were only available to firms that had been turned down for a commercial loan from their bank. That saw businesses being asked to pay interest rates of as much as 30%.

Following the changes to the scheme:

  • Applications will not be limited to businesses that have been refused a loan on commercial terms.
  • Larger firms with a turnover of up to £500m will also be eligible for more help.
  • The revamped scheme will offer government-backed loans of up to £25m to firms with revenues of between £45m and £500m.
  • Banks will also be banned from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000. However, the Treasury did not put in place restrictions on the interest rates that banks can charge for loans.
  • The requirement for companies to have first tried to get a normal commercial loan elsewhere will be dropped.

However, they are still loans. Companies wishing to take them out will be 100% liable for the debt and the government has not capped the interest rate banks can charge even though banks are able to borrow at close to 0%.

The loans may now be available to more businesses but what's not clear is whether firms want them.