UK-based small businesses feeling the squeeze on their working capital were thrown a lifeline in yesterday’s Spring budget when the Chancellor of the Exchequer unveiled the Coronavirus Business Interruption Loan Scheme.

Rishi Sunak said the scheme would “temporarily” replace the British Business Bank’s Enterprise Finance Guarantee (EFG), which offers funding – including asset finance and invoice finance – through approved bank and non-bank lenders to a £1.2m limit.

Finance terms are from three months up to ten years for asset finance and up to three years for invoice finance, the BBB said on its website.

Accredited providers best placed to capitalise on the anticipated demand for fee-free Covid-19 loans are likely to be Aldermore, ABN Amro and Skipton Building Society, given their direct link to banks.

Source: British Business Bank

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In a statement, the BBB said: “Unlike under EFG, the government will not charge businesses or banks for using the programme. We will also be guaranteeing a greater proportion of the lenders’ facilities, giving them greater confidence to provide facilities to small businesses.”

The BBB said the scheme targets SMEs with a yearly turnover of no more than £41m who are “not in financial distress”, have “a sound borrowing proposal, but insufficient security to meet a lender’s normal requirements.”

Addressing the House of Commons yesterday, the chancellor said: “The government will offer a generous guarantee on those loans, covering up to 80% of losses, with no fees, so that banks can lend with confidence.

“This will unlock up to £1bn of attractive working capital loans to support small businesses, with more as needed.”

In a statement, the British Business Bank said: We will be working closely with our current EFG delivery partners and government to implement the package of enhancements so that the new scheme is available in the coming weeks.”

Since its launch in 2009, EFG has supported the provision of about 32,000 business facilities to a value of over £3.3bn, as at end of June 2019, the BBB said.

The Coronavirus Business Interruption Loan Scheme also funds term facilities and overdrafts.