Following concerns raised by the APPG and others, The Chancellor, Rishi Sunak, has made welcome, rapid and significant improvements to the new Coronavirus Business Loans Interruption Scheme (CBILS). As we wanted, banks will now arrange these loans as the default option, rather than first trying to arrange standard commercial loans and these loans that can range from £5k to £5m will now be available to any SME whose business has been affected by the virus outbreak.
The requirement for a personal guarantee has also been dropped for loans under £250k and for loans over that amount a personal guarantee of a maximum of only 20% of the loan will be required. There will also be operational changes to get the money into businesses’ accounts much more quickly. For example, senior executives at NatWest told me yesterday that the whole process from application to drawdown of monies should take only 48 hours for a standard case.
We also welcome the new scheme, Coronavirus Large Business Loan Interruption Scheme (CLBILS), for businesses with turnovers in excess of £45m that fill the gap between the previous schemes.
We do need to make sure that access to the scheme is widened to other lenders, such as OakNorth, Aldermore, Fintech and alternative, non-bank lenders. The APPG on Fair Business Banking will continue to work closely with businesses and banks to make sure that the Chancellor’s scheme is a success and meets with its objective of delivering world-leading financial support to get save hundreds of thousands of jobs and businesses.
It is very important that businesses make full use of the other measures that the Chancellor has announced including non-repayable grants that can reimburse businesses for up to 80% of the salaries of employees, a similar scheme for the self-employed, business rates grants, HMRC Time to Pay scheme for VAT and PAYE, 3 month payment holidays for residential and buy to let mortgages and commercial loans, the opportunity to renegotiate lease payments, a 3 month freeze on loans and credit cards payments, a £500 interest free overdraft and the cancellation of increased rates due for larger overdrafts on personal accounts
With these changes, the onus is now on the banks to ensure that the scheme is delivered swiftly and fairly, which must include a fair reversion rate after the interest free period. Likewise, lenders must look at offering full payment holidays and a freeze on interest payments for commercial customers. All of society is bearing the brunt of this crisis, and everyone must take on a fair element of risk in order to get through this.