Following concerns raised by MPs, banks and small businesses, HM Treasury has overhauled how its Coronavirus Business Interruption Loan Scheme (CBILS) will operate to make it easier to access.

Now all viable small businesses affected by Covid-19, and not just those unable to secure regular commercial financing, will be eligible should they need finance to keep operating during this difficult time.

The Treasury has also dropped requirements for lenders to operate the scheme under normal lending protocols, which meant they often asked for security such as a personal guarantee or a charge over a property for smaller loans.

This will continue for loans of more than £250,000 however.

The move came after figures showed just £90m of these loans were approved for less than 1,000 firms in the last week from around 130,000 inquiries, with reports the scheme was too cumbersome and awkward to work with.

Large firm support

A government-backed scheme to provide financing to larger companies, being operated by the Bank of England, has also provided almost £1.9bn of support to firms with a further £1.6bn committed.

And support for large firms has been extended further.

The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will provide a government guarantee of 80% to enable banks to make loans of up to £25m to firms with an annual turnover of between £45m and £500m.

The Treasury said this will give banks the confidence to lend to more businesses which are impacted by coronavirus but which they would not lend to without CLBILS.

Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced later this month.

Changes a ‘big step forward’

Confederation of British Industry (CBI) director-general Dame Carolyn Fairbairn welcomed the revamp noting that the measures were a “big step forward” on the original scheme.

“They will help deliver cash faster to firms battling for survival in the headwinds of the pandemic,” she said.

“By providing more support for mid-tier companies, they are backing our most significant and iconic regional employers. These firms number in the thousands and make a huge contribution to the economy, so it’s good to see them getting the support they deserve.

“More detail and a clear time frame are still needed, but this plan is hugely welcome.”

She added that banks were working at breakneck speed and it was encouraging to see the government stepping in where urgent help is needed for businesses.

Federation of Small Businesses national chairman Mike Cherry echoed the support for the changes.

“Time is of the essence and therefore we welcome government action in ensuring that any viable small business that has been negatively impacted by the Coronavirus can now directly access CBILS rather than first being offered a bank’s own standard commercial lending product,” he said.

“Removing personal guarantees for all commercial loans below £250,000 is also very welcome. Taking on debt at the current time is a daunting prospect for many small businesses and the self-employed.

“We look forward to continuing our constructive engagement with government to ensure that debt can be repaid in an affordable way that allows small businesses to recover from this crisis and to thrive again,” he added.