The government has made it easier for SMEs to secure Treasury-backed emergency loans, which is likely to boost the scheme’s appeal to thousands of law firms.

Financial help under the Coronavirus Business Interruption Loan Scheme (CBILS) will be extended to all viable small businesses affected by Covid-19, not just those unable to secure normal commercial loans, chancellor Rishi Sunak announced today. This follows complaints that borrowers were being told by their banks to take on high-interest debt instead.

Personal guarantees for loans under £250,000 were another high hurdle, though these have now been dropped by many banks. Today, however, Sunak announced that personal guarantees can now only be demanded for the 20% of the CBILS loan over £250k not supported by the government scheme.  The government will continue to cover the first 12 months of interest and fees. 

There have been over 130,000 enquiries from small businesses for CBILS loans of up to £5m, which are available to firms with turnover up to to £45m. But only 983 businesses have had funding approved so far.

Chancellor of the Exchequer Rishi Sunak

Chancellor of the Exchequer Rishi Sunak

Source: Stefan Rousseau/PA Wire/PA Images


Mike Cherry, national chair, FSB (Federation of Small Businesses) commented: ’The most immediate issue threatening the survival of millions of small businesses and the self-employed is severely depleted cash flow. Time is of the essence and therefore we welcome government action in ensuring that any viable small business that has been negatively impacted by the Coronavirus can now directly access CBILS rather first being offered a bank’s own standard commercial lending product.’

He added: ’Removing personal guarantees for all commercial loans below £250K is also very welcome. Taking on debt at the current time is a daunting prospect for many small businesses and the self-employed.’

Meanwhile, Sunak announced a new loans package for midsized companies with turnover between £45m and £500m. They will be able to borrow up to £25m under the Coronavirus Large Business Interruption Loan Scheme, largely guaranteed by the state. 

Another scheme, the Covid Corporate Financing Facility, allows loans to companies with turnover over £500m through the Bank of England buying their commercial paper. The Law Society has approached the Treasury to see if this could be adapted so large law firm LLPs could apply.