Updates to Business Loans Scheme After Concerns Raised
- AuthorMichael Williams
The Business Interruption Scheme that was rolled out in the wake of the COVID-19 outbreak has faced criticism in recent days, with many firms struggling to access the support.
It has now been revamped, with Business Secretary, Alok Sharma announcing changes that should make the process simpler for hard-hit firms.
The Treasury said it had, in recent days, received more than 130,000 loan enquires from firms but fewer than 1,000 had actually been approved. Banks have come under fire during the process of insisting on personal guarantees to issue government-backed emergency loans to business owners.
This requirement loads much of the risk on the business owner, rather than the banks, but now, the changes to the scheme look set to make it easier for firms to access loans during the lock-down.
Previously, government-backed loans for small businesses were only available to firms that had been turned down for a commercial loan from their bank – and that saw businesses being asked to pay interest rates of as much as 30 percent.
In light of these updates to the scheme, applications will no longer be limited to firms that have been refused a loan on commercial terms. However, the Treasury hasn’t restricted the interest rates banks can charge for loans. Under these changes, larger firms with a turnover of up to £500m will also be eligible for more help.
The revamped scheme will in addition offer government-backed loans of up to £25m to firms with revenues of between £45m and £500m. Banks will now be barred from asking company owners to guarantee loans with their personal property or savings when borrowing up to £250,000. However, this scheme is still a loan-based scheme, so firms who take advantage of the loans will be liable for the debt, should they default.
This blog us an update to one published on March 19 about the Business Interruption Scheme, here.
Michael Williams is one of the founding members of JCP’s corporate and commercial team. Over the last 17 years, he has built up significant experience of company and commercial work. Michael has acted for a broad range of business clients from sole traders up to large international corporations, charities, venture capitalists and major financial institutions.
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