In our previous blog we reported on the lack of funding that the UK Government financial support measures provided to mid-tier businesses – leaving many unable to benefit from much needed funding to help with cash flow and liquidity issues. Many smaller businesses were also unable to qualify for support.

Today the Chancellor has announced changes to the Coronavirus Business Interruption Loan (CBIL) scheme that will enable smaller businesses to benefit and a new scheme to support larger companies.

The changes to the current CBIL scheme include:

  1. A ban on banks requiring personal guarantees for any dfacilities below £250k.
  2. Above £250k banks can still ask for a personal guarantee but any guarantee will be capped at 20% of the amount outstanding on the CBILS lending after any other recoveries from business assets.
  3. It is no longer a condition that the borrower has to have insufficient security.

The changes mean that smaller business from all sectors will now be able to apply for the full amount of the facility. Previously they were only able to access the scheme if they had been turned down for a commercial loan from their bank.

These changes will also apply to finance already offered under the scheme.

There will also be a new scheme (called the Coronavirus Large Business Interruption Loan Scheme (CLBILS))  that will be available to larger firms with a turnover of between £45 million up to £500 million.  Under the new scheme those businesses will be able to access loans of up to £25 million which will also be backed by a government guarantee of 80% – details of the new scheme have not yet been released.

The new scheme should hopefully plug the funding gap that had left many mid-tier businesses unable to benefit from the existing CBIL scheme or the Covid Corporate Financing Facility because they failed to meet the eligibility criteria for either.

That said, it is also reported that out of 130,000 loan enquires received, fewer than 1,000 had been approved.

Given the financial pressure on UK businesses and the economy as a whole, such a low approval rate is concerning. We can only hope that the changes announced today will see a great number of businesses being able to take advantage of the schemes enabling viable businesses to survive the current crisis. However, with all of the Government measures, it is also vitally important that business owners understand how further borrowings will impact their business and whether a loan is the right decision for the business.

Our detailed note on directors’ duties provides further guidance.