Government to back new business loans of up to £ 10million
The government must support loans of up to £ 10million for businesses in need of support until the end of the year, as its Covid-19 loan programs run out.
Chancellor Rishi Sunak told MPs he is planning a new stimulus loan program to roll back business.
From April 6, it will replace the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and its big brother CLBILS.
The Treasury will promise to cover 80% of what the banks lend if the companies do not repay their loans.
Mr. Sunak said, “Some businesses will also need loans to carry them out. As the Bounce Back and CBIL loan programs come to an end, we are introducing a new payback loan program to replace them.
“Businesses of any size can apply for loans ranging from £ 25,000 to £ 10million, until the end of this year.”
The new plan benefits from the same government guarantee as CBILS and CLBILS, but is less generous than the 100% guarantee for BBLS.
The bounce loans were first unveiled at the end of April last year and became available to businesses days later, in early May.
With higher collateral and less stringent lender controls, rebound loans have proven to be by far the most popular of the three regimes, both in terms of number of loans issued and total amount loaned.
As of February 21, more than 1.5 million businesses had received a loan totaling £ 45.6 billion, and half a million more had applied.
The BBLS was intended to quickly channel cash from banks to small businesses, up to £ 50,000 each. The government gave a 100% guarantee on the loans to ensure that the banks were not reluctant to lend.
BBLS, CBILS, CLBILS and the Bank of England’s Covid Corporate Financing Facility have between them granted tens of billions of pounds in loans to British companies.
In September, Mr Sunak promised that a new form of Covid loan program would be introduced at the start of the new year to replace the three programs backed by the Treasury. However, this was then suspended as infections and deaths skyrocketed, prompting more lockdown measures.
The Treasury also said it plans to give HM Revenue and Customs around £ 100million to hire 1,265 new staff to tackle fraud in support programs, including leave and employment support programs. self-employment.
Helen Dickinson, Managing Director of the British Retail Consortium, said: “We hope the loan program will play an important role in addressing the cash flow challenges that many businesses face.
“But it is vital that the Chancellor’s aspirations are met through the action of commercial lenders to ensure that this important funding reaches its destination quickly.”
Suren Thiru, head of economics at the British Chamber of Commerce, said: “The litmus test for the new program will be whether it is able to support the recovery by providing credit to companies that need it most. .
“The program needs to be in place from day one to ensure that businesses and banks can use it to help SMEs return to growth. Businesses will need an approach to the operation of the new program that is clear, consistent and mindful of the impact of the pandemic on their financial situation. “