When the Coronavirus Business Interruption Loan Scheme (CBILS) was first launched last month, it was welcomed with open arms by businesses across the UK. However, it soon became apparent that the CBILS was not the panacea that businesses hoped it would be and it wasn’t long before the scheme started attracting criticism.
In response to this, Rishi Sunak, the Chancellor of the Exchequer, recently announced several measures to expand and improve the original CBILS which has hopefully addressed the issues raised by frustrated business owners.
What was wrong with the first CBILS?
Since the launch of the CBILS a few weeks ago, £90 million of business interruption loans have been approved for almost 1,000 businesses hit by the coronavirus pandemic. As impressive as these statistics may seem it is a pretty low take-up rate from 130,000 business interruption loans enquiries and a drop in the ocean when you consider that the government has pledged £330 billion of support through loans and guarantees to businesses.
Amongst the criticism the original CBILS faced was that applicants were having great difficulty in accessing the financial support. Because speed is of the essence for any business suffering from cash flow problems it was imperative that this issue was resolved expeditiously. Another major issue was that banks were asking for personal guarantees from borrowers which would often be their homes.
Basically, the initial CBILS was flawed because it wasn’t comprehensive enough to include all SMEs, those that applied were faced with the daunting prospect of providing a personal guarantee and those the successful borrowers said the whole process took too long.
What are the new features?
The revised scheme states that a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS backed facility. The removal of personal guarantees for all personal loans below £250,000 is a big positive. Additionally, for loans in excess of £250,000, personal guarantees will be limited to just 20% of the outstanding amount on the CBILS after recoveries from business assets.
The newly revamped scheme has been extended to ensure all small companies affected by the coronavirus crisis can qualify for funding support instead of just those who are unable to receive commercial funding, New procedural changes are also being implemented to simplify the whole process and speed up lending approval.
Larger businesses now have their own scheme
The Coronavirus Large Business Interruption Loan Scheme (CLBILS) will create funding for thousands of more businesses and bolster support for firms that are not currently eligible for loans. With a government guarantee of 80% it will enable banks to provide loans of up to £25 million to companies with an annual turnover of between £45 million and £500 million. This reassurance will provide banks with the confidence to lend to larger companies that they would not have done without the security of the CLBILS. More details about this new scheme will be released later this month.
Initial feedback for the new CBILS is positive, and it is reassuring to know that the government has listened to the concerns raised by employers’ bodies representing SMEs and taken immediate action to resolve those issues. Also, the introduction of the CLBILS means even more companies have access to funding in these, the most challenging of times.
To find out more about the new CBILS and how to apply, click here.
If you would like advice about business interruption loans you can speak with one of our experts at Business Butler, just click: https://www.businessbutlerswansea.com/