(Secretary of State for
Business, Energy and Industrial Strategy): I am
tabling this statement for the benefit of Honourable and Right
Honourable Members to bring to their attention the changes we
have made to the Coronavirus Business Interruption Loan Scheme
and the Coronavirus Large Business Interruption Loan Scheme so
that more businesses can access the finance they need.
The Coronavirus Business Interruption Loan Scheme was launched on
23 March and is facilitated by the Government-owned British
Business Bank and delivered through its delivery partners.
Lenders offer loans of up to £5 million to support small and
medium sized businesses with a turnover up to £45 million that
are affected by the coronavirus outbreak.
The Coronavirus Large Business Interruption Loan Scheme was
launched on 20 April. Lenders can offer loans of up to £50
million to support viable businesses with a turnover of £45
million and above that are affected by the coronavirus outbreak.
On 3 April we announced changes to the CBILS scheme. The first
change was to the use of personal guarantees under the scheme.
Since the launch of CBILS, lenders had been permitted, but not
obliged, to require a personal guarantee from businesses for
loans of any size provided through CBILS. Lenders were never and
will never be permitted under any circumstances to use business
directors’ or their families’ principal residence as security. We
made changes to the use of personal guarantees through the scheme
to provide further reassurance regarding personal assets during
this difficult time.
The largest CBILS lenders had already confirmed, on a voluntary
basis, that they would not require personal guarantees for CBILS
loans under £250,000. The changes we made to the terms of the
scheme mean that no lender will be
permitted to require a personal guarantee for loans
or other CBILS facilities under £250,000.
For CBILS loans over £250,000, lenders are still permitted to
require a personal guarantee, although under no circumstances may
they use primary personal residences for this. Upon launch, in
the event of a default, lenders were previously expected to seek
to recover the loss from business assets and then using any
personal guarantees. Only when these had been exhausted were they
permitted to claim the residual loss under the guarantee
agreement. We made changes to these terms so that
lenders may now only look to the personal guarantee
for a maximum of 20 per cent of the remaining
debt before claiming 80 per cent of the residual loss
under the guarantee agreement.
The second change concerned the requirements businesses had to
meet to access CBILS. At launch, CBILS was designed to support
SMEs unable to secure finance on commercial terms. Because CBILS
was only available to companies that could not otherwise secure a
debt facility, it meant that preferable terms, such as the
government’s coverage of initial interest payments, were
unavailable to those businesses that were able to secure
facilities on commercial terms.
We therefore removed this requirement, meaning CBILS can
now support lending to smaller businesses even where they could
have secured a loan on commercial terms. This means
that in addition to meeting company size and sectoral
restrictions, the only other requirement for businesses is to be
able to demonstrate they have been adversely affected by Covid-19
and for lenders to judge that the business is viable. This means
that more businesses affected by the outbreak will be able to
benefit from a CBILS facility and the government’s 12-month
Business Interruption Payment and resulting lower initial
repayments.
On 27 April, we announced further changes to the
scheme. The cap on gross Government liability at the
level of the lender’s whole CBILS portfolio has now been
removed. Previously the Government’s gross liability
was capped at 75 per cent of losses across the lender’s whole
CBILS portfolio. Removing the portfolio cap therefore gives
lenders an 80 per cent guarantee across all CBILS lending. This
change should provide further confidence to lenders to support
the timely supply of finance to businesses.
We are also removing the ‘forward looking’ element of the
viability test. The current economic uncertainty
means that many businesses are having difficulties providing
cashflow forecasts, which is slowing down some lending decisions.
Allowing lenders to base lending decisions purely on an
assessment of business liability pre Covid-19 removes the
requirement for lenders to ask for evidence of future cashflow,
thereby speeding up lending decisions.
Finally, charities and Further Education colleges need
no longer show that at least 50 per cent of their income comes
from trading to be eligible for both CBILS and CLBILS
loans. In practice, this requirement precluded a large
number of organisations in these sectors from accessing support
through these schemes, and its removal will support these
organisations to access both schemes.
The removal of the portfolio cap increases the statutory
contingent liability of the CBILS scheme, and I will be laying an
updated Departmental Minute today containing a description of
that revised liability undertaken. The other changes do not
impact the statutory contingent liability of the CBILS scheme.
The removal of the requirement for at least 50 per cent of the
income of charities and Further Education colleges to come from
trading to be eligible for CLBILS also does not impact the
statutory contingent liability of the CLBILS scheme.
For more information on this and other support for business,
please go to https://www.businesssupport.gov.uk/
