UK banks have been banned from asking for personal guarantees for emergency coronavirus business loans.
The move comes after it emerged that, despite the launch of the UK government’s €330 billion coronavirus business interruption loan (CBIL) scheme – under which the government underwrites loans to companies – only 1,000 out of more than 130,000 requests under the scheme had been approved.
Yesterday, UK business secretary Alok Sharma had said the banks response had been “completely unacceptable”.
Part of the problem was that banks had been insisting directors put their own property or savings up as collateral before they are approved for the emergency loans.
Now, according to a report in The Guardian, Chancellor of the Exchequer Rishi Sunak has said the plan has been revised so that:
- Lenders would be banned from requesting personal guarantees – which mean borrowers often have to put their homes on the line – on loans under £250,000.
- The loan scheme would be extended so that it covered all small companies affected by Covid-19 and not just those unable to get commercial funding.
- There would be a new scheme to bolster support for larger firms not currently eligible for loans, under which the government would provide a guarantee of 80% so that banks could make loans of up to £25m to firms with an annual turnover of between £45m and £500m.
The report added that the Chancellor would be speaking to bank chief executives next week to discuss how the schemes are working and “ensure everybody is playing their part”.