The Coronavirus Business Interruption Loan Scheme (CBILS) offers a loan of up to £5 million that is interest free for the first 12 months however there are concerns about “the way the loan scheme is being rolled out and being interpreted  by some lenders”.

The Business, Energy and Industrial Strategy Committee has written to Rishi Sunak, outlining a series of concerns regarding the Coronavirus Business Interruption Loan Scheme (CBILS).

The letter warns that the way the loan scheme is being rolled out and being interpreted  by some lenders is discouraging small and medium-sized businesses from accessing the loans and specifically states that:

  • The CBILS guidance is being used by some lenders to push their own financial products first, when CBILS would be the preferred and more appropriate product.
  • Several lenders are seeking personal guarantees from SME business owners (e.g. recourse to personal assets if their companies failed), though a number of lenders now appear to have backtracked.
  • Some lenders were seeking to apply high interest rates on the loans when the interest free period ended.
  • Some lenders seem slow and reactive in approaching the British Business Bank to apply for loans while the process for SMEs to apply for such loans appears cumbersome.

To address some of these issues, the letter asks the chancellor to consider:

  • Clarifying the guidance on when CBILS should be offered, so that lenders are clear that they should be offering SMEs the most appropriate product to help ensure their onging viability.
  • Encouraging lenders not to use personal guarantees and rethinking how liability for unpaid loans can be met.
  • Giving clear guidance on levels of interest rates to be charged by lenders which do not leave SMEs with unsustainable levels of debt when they will be seeking to rebuild their businesses.
  • Asking lenders to be more proactive in approaching the British Business Bank and streamlining applications so that SMEs can access funds quickly.
  • Ensuring that medium-sized firms in the regions, upon which many jobs depend, also have access to funds.
  • Requiring lenders and the British Business Bank to produce regular weekly updates on the total amount of lending that is taking place through CBILS, broken down by lender, number of SMEs applying and number successful by lender, the average time each lender is taking to process applications, region, business size and sector.

Rachel Reeves, Chair of the Business, Energy and Industrial Strategy Committee yesterday said:

“The Chancellor’s loan scheme is very welcome and necessary but a number of businesses are coming forward with concerns about the Coronavirus Business Interruption Loans Scheme.

I hope the Chancellor will examine these concerns to make sure businesses get the support they need. Giving clearer guidance to lenders so they can ensure SMEs get the right loan to help them through this crisis and encouraging lenders to look for alternatives to personal guarantees will be important in ensuring CBILS delivers for businesses up and down the country.

Banks need to be more proactive in approaching the British Business Bank and streamlining applications so that SMEs can access funds quickly. Lenders and the British Business Bank should also be coming forward with regular updates on the total amount of CBILS lending that is taking place so we can see that these monies are going through to the businesses that need them.

“Banks were kept afloat by government and taxpayers during the financial crisis. I would urge them to play their part in helping small and medium sized businesses through this crisis”.

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