The Government’s Coronavirus Business Interruption Loan Scheme currently provides lenders with a guarantee of 80% of the outstanding balance on each loan provided to SME’s.
Following pressure from Labour and other opposition party MPs, the Chancellor updated the scheme so that personal guarantees cannot be taken for facilities less than £250k, and that people’s primary residences are not allowed to be taken as security under the scheme.
Despite this, small businesses have struggled with the complicated eligibility criteria and delays of up to six weeks for applications to be processed, often being passed to different lenders.
On 15 April at Treasury Select Committee, MPs on the committee put questions on the impact of coronavirus on banking and finance to Stephen Jones, the CEO of UK Finance and Stephen Haddrill, the Director General of the Finance and Leasing Association.
Rushanara Ali MP highlighted the urgent need for small businesses to get financial support sooner, and asked if lenders felt that the Government should be providing 100% guarantees on loans in order to save struggling small businesses.
Rushanara Ali MP said:
‘Small businesses are essential to our communities and employ millions of people across the country. Many of our smallest businesses are now on the verge of collapse.
I welcome reports that the Chancellor is considering a way to provide financial firms with 100% guarantees on loans, and urge him to do this as soon as possible. This will enable banks to offer loans to SME’s and accelerate the process of getting the money to them. The Chancellor must act now to ensure that our vital small businesses can survive this crisis.’