Coronavirus Business Interruption Loan Scheme overhauled to reach more small businesses

The government has announced changes to the loan scheme aimed at helping businesses deal with the impact of coronavirus after claims that many companies can't access funding.

The Coronavirus Business Interruption Loan Scheme (CBILS), which provides interest free funding for 12 months, launched on 23 March but entrepreneurs have complained about struggling to get in touch with lenders, being told they have to wait weeks or having to use loans with high interest rates.

Delivering the government's daily coronavirus update on Wednesday, business secretary Alok Sharma said: "It would be completely unacceptable if any banks were unfairly refusing funds to good businesses in financial difficulty."

To combat the problem, the requirement for banks to first assess whether companies are eligible for normal lending options has been removed. This is aimed at expanding CBILS to more businesses and speeding up the application process so firms hit by COVID-19 get the funding quicker.

Many businesses owners have also reported being forced to put up their savings or property as collateral but no lenders can now ask for personal guarantees for loans below £250,000.

The British Business Bank, which administers the scheme, said the changes should be retrospectively applied by lenders for CBILS loans offered since 23 March.

Banks that have offered commercial non-CBILS products have also been asked to bring them onto CBILS and apply the changes retrospectively.

"An incredible demand for CBILS"

Since CBILS launched, almost 1,000 facilities valued at £90.5m have been approved by lenders.

That however is from a total of 130,000 applications, according to a report by BBC News.

The first loan was delivered by Yorkshire-based Skipton Business Finance, with other lenders including the Business Enterprise Fund, Newable Business Loans, the Northern Powerhouse Investment Fund, Finance For Enterprise, Danske Bank, Clydesdale Bank and HSBC.

The British Business Bank said new lenders will continue to be accredited.

Keith Morgan, the Bank's chief executive, commented: "It was essential to get the Coronavirus Business Interruption Loan Scheme up and running as quickly as possible to get additional funding flowing to smaller business.

"We have seen an incredible demand for CBILS since it launched, so opening up access to the scheme to even more smaller businesses across the UK will enable lenders to expand their support, deploying vital funding where it is most needed."

Through CBILS, UK businesses turning over up to £45m can borrow funding of up £5m through more than 40 accredited lenders.

Applying businesses need a borrowing proposal which, were it not for the coronavirus pandemic, would be considered viable by the lender.

There no fees and the business won't pay interest for 12 months. The scheme provides the lender with an 80% government guarantee but borrowers always remain 100% liable for the debt.

Various types of funding is available including term loans, overdrafts, invoice finance and asset finance.

Enterprise Nation's reaction

Emma Jones, founder of Enterprise Nation, said: "We think the overhaul announced by the chancellor will make a welcome difference, and certainly speed things up for SMEs.

"The increase in the number of accredited alternative digital funders is also helpful, but as more firms use this facility,  it will be a critical job to ensure these debts don't cause business failure down the line.

"From our point of view, a large debt is not something most small firms and self-employed individuals will want to take on."

There is more Coronavirus Business Interruption Loan Scheme guidance for small businesses here.

The latest coronavirus support information

We are keeping you updated on the latest information on how to access the government's coronavirus business support here. You can also find advice and ask a question on Enterprise Nation's coronavirus business advice hub. Follow Enterprise Nation on Twitter too for updates.