UK SMEs on brink of collapse despite coronavirus loan scheme

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Many British SMEs are currently facing liquidity due to questions over the details around the Coronavirus Business Interruption Loan Scheme (CBILS).

Chancellor of the Exchequer Rishi Sunak is set to overhaul the emergency loan scheme over growing concerns that businesses may go bust before they can access the funds.

Treasury officials have reportedly been in discussions with Britain’s leading financial institutions over the scheme in the last 48 hours.

Sunak is due to announce to the government that the requirement for banks to assess whether companies are eligible for other funding products before allowing them to access the Coronavirus Business Interruption Loan Scheme will be scrapped, in hopes of speeding up the process.

Under the proposed changes, the ability for SMEs to access this funding from the banks would be made quicker and easier – meaning businesses can access a loan of up to £5m. The reformed scheme will allow any viable business with a turnover of up to £45m being given access to the funding.

The Coronavirus Business Interruption Loan Scheme supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5m and for up to six years.

The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.

The government will also provide lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.

There are 40 accredited lenders able to offer the scheme, including all the major banks


Industry reaction

CEO of Ascot Group, Andrew Scott, comments on the current CBILS situation.

It’s month-end and cashflow is rapidly becoming a problem for many small firms as customers delay or avoid payment, ask for more time to pay, ask for contracts to be paused or simply reply ‘Closed until further notice’.

Meanwhile, employees must continue to be paid including those furloughed.

The ‘CBILS’ loan scheme now needs rapid deployment to avoid many small (and larger) firms collapsing.

It’s also important that companies recognise that many suppliers and service providers are small businesses that depend on those payments for their livelihood, so now is not the time to blanket cancel payment runs.

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