Chancellor to unveil redesign of emergency small business (SME) assistance amid warnings of flood of insolvency as businesses struggle to access banking system funds cracking under the COVID-19 crisis.
Sky News has learned that Rishi Sunak will announce in the coming days that a key feature of the Coronavirus The business interruption loan scheme - the requirement for banks to first assess whether SMEs are eligible for their other lending options - will be abolished.
On Wednesday, Mr. Sunak and his Treasury officials were said to have met with participating lenders, including street giants such as Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland.
An announcement is possible as of Friday, according to an insider.
The move will aim to speed up decision-making processes within large banks and to channel loans of up to £ 5 million more quickly to an army of SMEs.
The Treasury was triggered by a multitude of reports in the ten days following the launch of CBILS, according to which business owners are refused loans by it or are forced to use other loans standard SME loan products.
Under the redesigned program, any viable business with sales of up to £ 45 million will be able to access the program, which is interest-free and free of charge for the first 12 months.
Sources stressed that program users would still be required to demonstrate that their business was viable at the start of the crisis and that they had the capacity to repay the loan at the end of the term.
Banks have also reportedly agreed to waive any pending requests for personal guarantees on loans of up to £ 250,000 - a problem that has been a source of growing controversy in recent days, despite the fact that this has been stipulated in the terms from CBILS.
All personal guarantees on loans over £ 250,000 will be used to cover the 20% of the loan the government does not take out, according to an official.
Other aspects of the structure of CBILS, notably the government guarantee which covers 80% of the lenders' exposure, should remain unchanged.
Sources said the Treasury also wanted banks to publicly accept a modest "reversion rate" - a reference to the interest rate at which loans would return after the initial 12-month period.
Banks and social media have been inundated with complaints from SMEs about the difficulty of communicating with their lenders to discuss CBILS and the.
Banking sources have endeavored to point out that with most bank branch networks closed and absenteeism at unprecedented levels due to the coronavirus epidemic, the industry has worked tirelessly to get the program off the ground. emergency loans.
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As of Wednesday evening, the details of Mr. Sunak's planned overhaul, including the number of companies that would now be considered eligible, were unclear.
It was also unclear whether the expansion of CBILS would raise EU state aid concerns, although an official said they were probably manageable.
A source warned that the administration of the scheme by the British Business Bank was still likely to be too burdensome at a time when hundreds of thousands of SMEs were facing a funding crisis.
A study cited by the BBC on Wednesday warned that a fifth of British SMEs could run out of cash within a month.
The Treasury is also under pressure to design a financing solution for thousands of companies that are not eligible for the CBILS because they have a turnover of more than £ 45 million and do not have a credit rating. first quality.
The largest of Sunak's bailouts is the £ 330 billion corporate finance facility that was put in place to buy and lend commercial paper from big companies.
The Treasury and British finance, which represent the main British banks, all declined to comment.