CBILS CHANGES
As expected, The Chancellor made an announcement to “tweak” the CBILS, following representations made by business and representative bodies, such as the Federation of Small Business, CBI etc. This is due to some complaints that banks were steering business away from the CBILS to other more expensive products.
The following changes have now been made:
- no personal guarantees for loans under £250,000;
- personal guarantees for loans above £250,000 may still be required at the lender’s discretion, but recoveries under these are capped at a maximum of 20% of the outstanding balance of the loan after the proceeds of business assets have been applied. (As the bank gets 80% back from the Government);
- a home cannot be taken as security to support a personal guarantee or as security;
- the requirement to have first tried to get a normal commercial loan elsewhere, will be dropped.
The Chancellor has also requested that operational changes are devised to speed up lending approvals. The number of providers of the CBILS is also going to increase, with new alternative finance lenders being accredited under the scheme creating more choice and diversity of supply for smaller businesses.
Still no restrictions on interest charges after the 12-month interest-free window.
The Government has advised that £90 million of loans have been approved for 1,000 businesses under the scheme, since last week.
Although it looks like the process will be simpler and less onerous, consideration should always be taken regarding the level of borrowing and how it will be repaid.