I am tabling this statement for the benefit of hon. and right hon. Members to bring to their attention the changes we have made to the Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme so that more businesses can access the finance they need.
The Coronavirus Business Interruption Loan Scheme was launched on 23 March and is facilitated by the Government-owned British Business Bank and delivered through its delivery partners. Lenders offer loans of up to £5 million to support small and medium sized businesses with a turnover up to £45 million that are affected by the coronavirus outbreak.
The Coronavirus Large Business Interruption Loan Scheme was launched on 20 April. Lenders can offer loans of up to £50 million to support viable businesses with a turnover of £45 million and above that are affected by the coronavirus outbreak.
On 3 April we announced changes to the CBILS scheme. The first change was to the use of personal guarantees under the scheme. Since the launch of CBILS, lenders had been permitted, but not obliged, to require a personal guarantee from businesses for loans of any size provided through CBILS. Lenders were never and will never be permitted under any circumstances to use business directors’ or their families’ principal residence as security. We made changes to the use of personal guarantees through the scheme to provide further reassurance regarding personal assets during this difficult time.
The largest CBILS lenders had already confirmed, on a voluntary basis, that they would not require personal guarantees for CBILS loans under £250,000. The changes we made to the terms of the scheme mean that no lender will be permitted to require a personal guarantee for loans or other CBILS facilities under £250,000.
For CBILS loans over £250,000, lenders are still permitted to require a personal guarantee, although under no circumstances may they use primary personal residences for this. Upon launch, in the event of a default, lenders were previously expected to seek to recover the loss from business assets and then using any personal guarantees. Only when these had been exhausted were they permitted to claim the residual loss under the guarantee agreement. We made changes to these terms so that lenders may now only look to the personal guarantee for a maximum of 20% of the remaining debt before claiming 80% of the residual loss under the guarantee agreement.
The second change concerned the requirements businesses had to meet to access CBILS. At launch, CBILS was designed to support SMEs unable to secure finance on commercial terms. Because CBILS was only available to companies that could not otherwise secure a debt facility, it meant that preferable terms, such as the Government’s coverage of initial interest payments, were unavailable to those businesses that were able to secure facilities on commercial terms.