Further action to support firms affected by the coronavirus crisis is being taken by chancellor Rishi Sunak.
Business interruption loans for small businesses are being bolstered while a new scheme has been unveiled for larger companies.
More than £90 million of loans to nearly 1,000 small and medium sized firms have been approved under the government’s Coronavirus Business Interruption Loan Scheme (CBILS) since its launch last week.
A government-backed scheme to provide financing to larger companies, being operated by the Bank of England, has also provided almost £1.9 billion to firms with a further £1.6 billion has been committed.
The CBILS is being extended so that “all viable small businesses” affected by Covid-19 – not just those unable to secure regular commercial financing – will now be eligible should they need finance to keep operating during the pandemic, according to HM Treasury.
The government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals.
The government pledge to continue to cover the first 12 months of interest and fees.
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 £25 million to firms with an annual turnover of between £45 million and £500 million.
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.
Sunak said: “We are making great progress on getting much-needed support out to businesses to help manage their cashflows during this difficult time – with millions of pounds of loans and finance being provided to hundreds of firms across the country.
“And now I am taking further action by extending our generous loan scheme so even more businesses can benefit.
“We have also listened to the concerns of some larger businesses affected by Covid-19 and are announcing new support so they can benefit too.
“This is a national effort and we’ll continue to work with the financial services sector to ensure that the £330 billion of government support, through loans and guarantees, reaches as many businesses in need as possible.”
More than 130,000 enquiries have been received from businesses across the country for business interruption loans, according to latest figures from UK Finance. Some 983 businesses have had finance approved, while banks are processing thousands of loan applications.
The scheme changes will help them approve loans for the smallest businesses as quickly as possible, HM Treasury claimed.
For loans over £250,000, personal guarantees will be limited to just 20% of any amount outstanding on the CBILS lending after any other recoveries from business assets.
Lenders were already prohibited from asking business owners to put their house on the line.
This will apply to finance already offered under the scheme, to ensure that all business owners receive the same level of government protection.
Business Secretary Alok Sharma MP said: “The coronavirus pandemic represents a challenge to businesses unlike any other they have faced before and we are determined to support them through this difficult time.
“The changes we are making to the Coronavirus Business Interruption Loan Scheme will make it easier for business to access the lending we have put in place, helping them to continue trading and protect the livelihoods of their staff.”
The chancellor and the governor of the Bank of England, Andrew Bailey, wrote to banks last week asking them to support small and medium-sized enterprises in any way they can.
This included ensuring interest rates offered to struggling businesses are “reasonable” and to pass on the benefit of the government guarantee to those borrowing under the Coronavirus Business Interruption Loan Scheme.
Federation of Small Businesses chairman Mike Cherry said: “The most immediate issue threatening the survival of millions of small businesses and the self- employed is severely depleted cash flow.
“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 first being offered a bank’s own standard commercial lending product.
“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.”