New rules on crisis loans will help more companies survive says Sheffield-based bank boss
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Under new rules operational today (Monday April 6) ‘personal guarantees’ that required bosses to put their homes and other assets on the line have been ditched for loans below £250,000.
And insufficient security is no longer a condition of access to the Coronavirus Business Interruption Loan Scheme which pays out up to £5m to SMEs experiencing lost or deferred revenues due to lockdown.
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Hide AdBanks also won’t be required to make companies apply for conventional loans prior to requesting a CBILS facility.
But responding to criticism that government guarantees covering only 80 per cent of the value of a loan were a ‘bottleneck’ to lending, BBB chief executive Keith Morgan said it was up to banks and lenders, who are on the hook for the remaining 20 per cent, to make decisions quickly.
In the US, the government guarantees 100 per cent of loans under a similar scheme.
He said: “This new scheme will help businesses survive the Covid-19 crisis but speed is important. The role of lenders is very important. It’s up to banks and lenders in the scheme to deal with borrowers and make lending decisions. The British Business Bank is providing lenders 80 per cent government-backed guarantees to give them confidence to make loans at this time.”
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Hide AdThe bank funnels to cash to more than 40 lenders under the CBILs scheme. The government pays interest and fees for the first 12 months. But the borrower remains 100 per cent liable for the debt. Finance of up to £5m is available on repayment terms of up to six years.
Morgan said a new crop of lenders were poised to join the 40 firms already participating in CBILS, which should expand the program’s reach.
He also said a new scheme of loans up to £25m was being rolled out to the UK’s 10,000 firms with turnover between £45m and £500m this month.