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Government extends support for businesses hit by coronavirus
The Government has extended a business loan scheme to help small businesses struggling due to the coronavirus, but critics say it falls short of the help needed.
The Government has revamped its loans for businesses struggling due to the coronavirus.
It has extended its Coronavirus Business Interruption Loan Scheme so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance to keep operating during this difficult time.
The Government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals. It says it will continue to cover the first 12 months of interest and fees.
The scheme has come in for a lot of criticism with many businesses complaining they cannot access loans. Experts say the revamp falls short of what is needed to help them and that it remains easier for businesses to furlough employees or make them redundant.
Alberto Thomas, Founding Partner of Fideres, a specialist economic consultancy which has previously advised the Treasury, says: “Today’s announcements fall short of what is required by our government to minimise unemployment. The unemployment tragedy will be of colossal dimensions.”
He said banks do not have the resources to process and approve the loan requests fast enough and are still allowed to abuse the system by being allowed to charge whatever interest they want even when 80% of the loans are guaranteed by the Government. The main criticism is around lack of transparency and simplicity and are subject to each lender’s lengthy decision process and to their policies in terms of interest rates. Thomas says this “does not create a level paying field and forces businesses to waste valuable time to shop around for best rates”.
He adds: “The solution to these issues consists in making the government the effective lenders, directly
linking the loans to the payroll costs of the borrowers and introducing measures to keep business
accountable, once the crisis is over.”
linking the loans to the payroll costs of the borrowers and introducing measures to keep business
accountable, once the crisis is over.”
IPSE, the organisation for freelancers and contractors, welcomed the scheme, but expressed concerns that some limited companies might slip through the cracks because they were worried about being able to pay back loans. It is urging the Government to develop bespoke support measures for them, such as temporary tax breaks or grants.
The Government has also launched a new Coronavirus Large Business Interruption Loan Scheme for larger firms. It 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 will be offered at commercial rates of interest and further details of the scheme will be announced later this month.
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