Maximum coronavirus loans for large firms increased to £200m

The government has raised the limit companies can borrow through its business loan scheme from £50m to £200m following criticism that many larger firms were unable to access credit to keep them solvent during the coronavirus lockdown.

The maximum loan size available through the coronavirus large business interruption loan scheme will increase from next week, the Treasury said.

Companies that use the extended scheme will be banned from paying dividends to shareholders and will face restrictions on the bonus payments to board directors and the level of share buybacks during the period of the loan.

Business groups welcomed the extension, saying it filled a gap in the range of rescue measures put in place by the government over the last two months.

Rain Newton-Smith, the chief economist at the the CBI, said: “Some mid-cap businesses urgently need access to larger loans to tide them over at this critical juncture for the economy.

“Many of them are important regional employers, so the Treasury’s extension of maximum loans shows just how much they are listening to the concerns of business right now.”

The scheme allows company boards to borrow up to 25% of turnover, up to a maximum of £200m. Banks underwrite 20% of the loan while the government provides the other 80%.

The Treasury said the extension would ensure organisations that failed to qualify for the Covid Corporate Financing Facility (CCFF) loan scheme managed by the Bank of England would have access to enough finance to meet cashflow needs during the outbreak.

John Glen, the economic secretary to the Treasury, said: “We’re determined to support businesses of all sizes throughout this crisis and our loans and guarantees have already provided over £32bn to thousands of firms.

“Today we’re increasing the maximum loan to £200m to make sure companies get the help they need.”

Glen said bonuses could be paid only if they were agreed by the board ahead of a loan application and were in line with bonuses paid in previous years. Share buybacks could be negotiated with lenders.

Suren Thiru, head of economics at the British Chambers of Commerce, said: “It is good to see the government continue to listen to business concerns and make improvements to existing schemes.

“These important changes could make a real difference to larger firms in particular and alongside the other lending support schemes will help ensure that more businesses of all sizes get access to the finance they need to help weather this unprecedented economic storm.”

Figures last week showed British businesses have so far received almost £15bn of emergency financial aid through government-backed rescue loans with successful applications from more than 304,000 companies.

The largest slice of loan funding has been disbursed in the last fortnight under a new “bounce back loan” scheme that targets small businesses with 100% government-backed loans. Almost £8.4bn was borrowed by about 268,000 small firms during the first week of the government scheme.

This left 36,000 firms to borrow £6bn-worth of funds through the Cbils scheme and only £359m of loans to be agreed through the coronavirus large business interruption loan scheme. Another £18.7bn was borrowed through theCCFF loan scheme.

Source: Read Full Article