Concern over qualifying for Coronavirus Business Interruption Loan Scheme

Chancellor Rishi Sunak unveiled the business interruption loans scheme in his first Budget earlier this month and beefed it up last week

The Government’s small business coronavirus rescue loans were launched today, but some entrepreneurs say they are confused as to whether they can get help.

The Coronavirus Business Interruption Loan Scheme was announced in the Budget and beefed up last week by Chancellor Rishi Sunak to sums of up to £5million, and is available through the British Business Bank’s accredited lenders.

But there are concerns that a provision that means lenders must assess whether businesses are viable means that banks will turn down loss-making firms, hitting start-ups more focussed on scaling up than profits.

Some entrepreneurs took to Twitter to complain that this made the rescue scheme too subjective. 

Chancellor Rishi Sunak unveiled the business interruption loans scheme in his first Budget earlier this month and beefed it up last week

James Morris, of Trafalgar and JF Marquees, tweeted: ‘The word ‘viable’ is too open to interpretation by individuals administering these scheme’.

Meanwhile, Simon Menashy, a partner at venture capital firm MMC Ventures, tweeted: ‘Being told very clearly by banks that #CBILS will *not* be available for *any* loss-making companies, based on Gov criteria. We urgently need this changed or challenged.’

The Coronavirus Business Interruption Loan Scheme (CBILS) is designed to help smaller companies hit by the Covid-19 outbreak, which has led to businesses being ordered to shut, people told to stay home, and left thousands sick and unable to work. 

While businesses have welcomed the Chancellor’s attempts to help them, some have questioned whether it will get money to those in need fast enough. 

Katrin Herrling, of funding platform Funding Xchange, said: ‘We hear from our customers that the smallest businesses, those needing £15,000 to pay their staff at the end of the month, are currently experiencing the biggest challenges.’ 

‘Our data certainly shows a surge in demand for these type of micro-loans – with almost two-thirds of customers introduced to us through the bank referral process seeking a micro-loan.’

The business interruption loans can be up to £5million and are available to businesses based in the UK with a turnover of £45million or less, who are experiencing virus-related cash flow issues.

Keith Morgan, chief executive of the British Business Bank, said: ‘Available from today, we hope this new scheme will enable lenders to provide the finance smaller UK businesses need, alongside other government measures, to help them survive the current economic disruption.’  

There is no fee for small businesses and the government will pay interest and fees for up to 12 months. Loans of up to £250,000 can be made available unsecured. 

Herrling of Funding Xchange said some banks are not up for the mammoth task ahead

Herrling of Funding Xchange said some banks are not up for the mammoth task ahead

The terms will be up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.

However, some small business owners fighting for survival are still unsure how the business interruption loans will work, or if they are even eligible for support. 

The borrower must have a proposal that without the Covid-19 pandemic would be considered viable by the lender. 

The bank must also believe the finance will enable the business to trade out of any short-to-medium term difficulty.

This has caused confusion among some small business owners as it suggests support will not be provided for any loss-making companies 

Meanwhile, where the loans are made by accredited lenders, they will be 80 per cent guaranteed by the government, however, the borrower is still liable to repay 100 per cent of the debt.

Enterprise Nation, which represents over one million small firms and self-employed individuals, said it welcomes the measures that have been taken to date, which are ‘significant and reflect the enormity of challenges faced by small business’.

However, it has raised concerns around how funds can reach small businesses in time, and support for the self-employed and freelancers who, to date, have not been covered in announcements and schemes.       

Others have said while the BBB has the money to give to banks to distribute, they are not yet up to the mammoth task ahead due to a lack of investment in digital capabilities.

Katrin Herrling, said: ‘Many banks have not invested in the digital customer journeys that consumers are using to self-serve. In this crisis, as bank staff is dislocated, this means that “contacting your bank” has become a real challenge especially for small businesses served by call centres. 

She added that she believes this is the ‘tip of the iceberg’ and that many more small businesses will be left in limbo.

She said: ‘To help these businesses now to access the finance they need, we need a simple digital access point to the government’s support scheme that allows businesses to see instantly what they are eligible for, apply digitally and receive funding in minutes.’ 

Bailout package: The six measures 

Coronavirus Job Retention Scheme 

  • Government covers 80 per cent of wages up to £2,500 a month 

Coronavirus Business Interruption LoanScheme 

  • Government guarantees 80 per cent of loans up to £5million for SMEs 

Covid Corporate Finance Facility 

  • Bank of England provides unlimited loans to large businesses by buying corporate bonds 

Business rates holiday 

  • No business rates paid by hospitality and retail firms until April 2021 

Grants to small business 

  • Council grants up to £25,000 for small firms who do not benefit from business rates holiday 

VAT bills postponed 

  • £30billion of VAT payments from businesses delayed for three months 

Local councils will also hand out grants of £10,000 to £25,000 to the smallest business who do not benefit from the Government’s one-year business rates holiday. 

But councils, who will hand out the money, have not been provided with details of the scheme. 

The Treasury said: ‘We know businesses and their employees need help now – which is why we’ve announced an unprecedented package of support and are working to deliver it at unprecedented speed.

‘We will do whatever it takes to protect jobs and keep businesses operating, with work taking place around the clock on additional plans to ensure all firms can access the credit they need.’


Small Business Essentials


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