Law360, London (April 3, 2020, 12:35 PM BST) -- The government is expanding an emergency lending program to help keep businesses afloat during the coronavirus lockdown, the chancellor announced Friday, as he responded to complaints about lack of access to the money.
More companies will get access to financial support, the Chancellor said, as he announced wider measures to help struggling businesses. (AP)
The Chancellor of the Exchequer said that more companies will gain access to financial support as he announced a wider package of measures on Friday to help them stay afloat.
“I am taking further action by extending our generous loan scheme so even more businesses can benefit,” Sunak said Friday. “We have also listened to the concerns of some larger businesses affected by COVID-19 and are announcing new support so they can benefit too.”
Sunak said the loans will be extended to all viable small and midsized businesses that have faced financial difficulty during the COVID-19 pandemic, rather than just those that have been turned down for commercial lending. The loan scheme will be widened to give larger businesses with turnover as high as £500 million access to support, largely guaranteed by the state.
The finance minister has also banned banks from requesting personal guarantees for emergency loans under £250,000 to reduce financial risk for applicants. Banks have come under fire for asking business owners to put their savings on the line to secure the emergency loans.
Critics including the all-parliamentary party group on fair business banking said banks should not be deciding whether to ask for security guarantees. The Treasury has now stipulated that personal guarantees can be asked for just 20% of the loans over £250,000 not supported by the government scheme.
Interest rates offered to struggling businesses are also expected to be kept low.
The chancellor announced his coronavirus loan scheme — which allows the government to underwrite loans to companies — on March 17. More than £90 million of loans have been approved so far, the Treasury said.
“This is a national effort and we’ll continue to work with the financial services sector to ensure that the £330 billion of government support, through loans and guarantees, reaches as many businesses in need as possible," Sunak said.
The Chancellor, together with the Bank of England and Financial Conduct Authority, wrote to the chief executives of Britain’s banks in March to urge them to make sure that the benefits of the loan scheme are passed to businesses and consumers.
Friday's announcement comes after Business Secretary Alok Sharma said at the government's daily COVID-19 press briefing on Thursday that it would be “completely unacceptable if any banks were unfairly refusing funds to good businesses in financial difficulty,” particularly after the taxpayer-funded bailouts after the financial crash in 2008.
Sunak said he will meet chief executives of banks next week to discuss how to implement the schemes.
--Editing by Ed Harris.
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