HM Treasury announced an extension of its Covid-19 emergency scheme until the end of January as part of new rules meant to keep SMEs afloat during England’s second lockdown.
The extension will cover bounce back loans (BBLS), coronavirus business interruption loans (CBILS) and the CLBILS scheme for larger firms, equivalent to a two-month extension based on the original 30 November deadline.
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CBILS
The CBILS facility, which allows firms to borrow up to £5m and comes with an 80% government guarantee, includes asset finance among other financial solutions. The British Business Bank is the administrator of the schemes.
SMEs currently in receipt of funds through the 100% government-backed Bounce Back scheme – which offers firms cheap loans worth up to £50,000 – will also be able to top up existing loans if they need additional cash.
The top-up is designed to help SMEs that borrowed less than the maximum sum available – up to 25% of their turnover to a limit of £50,000 – to avoid taking on extra debt. However, most firms made those calculations before the second lockdown in England was announced.
In a statement, the Government said: “We understand that some businesses didn’t anticipate the disruption to their business from the pandemic would go on for this long; this will ensure that they are able to benefit from the loan scheme as intended.”
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By GlobalDataFirms will be able to request a once-only top-up. The BBLS has distributed about £40bn to 1.3m UK businesses to date.
While the chancellor had committed to crafting a new government-backed loans programme for 2021, the reality of a second lockdown put more businesses under pressure without additional emergency funding.
Kevin Hollinrake MP (pictured), a co-chair of the all-party parliamentary group (APPG) on fair business banking, told The Guardian that SMEs would benefit from an extension into the middle of 2021.
Hollinrake criticised HM Treasury for failing to address the fact that non-bank lenders are blocked from accessing cheap funding from the Bank of England.
According to the current arrangements, non-bank lenders cannot afford to offer BBLS – which come with a flat 2.5% interest rate – to their customers. A rate considered to be largely below commercial rates.
Meanwhile, most lenders that do have access to cheap Bank of England funds are not processing applications from non-customers.
About 250,000 businesses are largely blocked from emergency loans, the APPG estimated.
