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Government Extends Loans Access for Struggling Small Businesses

Written by: Keith Tully

Shaking hands over a business loanThe government has announced changes to its emergency business loans schemes to provide financial support to more small firms who might previously have been ineligible.

The changes will function through lenders who are being advised to adjust their approval processes so that companies clearly in financial difficulty can apply for loans of up to £5 million.

Until recently it was not possible for government to back loans given out to small companies with accumulated losses and high levels of debt because to do so would have fallen foul of EU rules on state aid.

But those rules have now been relaxed so there will be fewer restrictions on lending to small companies, even if they might officially be categorised as ‘undertakings in difficulty’.

Businesses with fewer than 50 employees and a turnover of less than £9 million are the intended beneficiaries of the rule changes, with the funds involved to be drawn from the same sources as the government’s Coronavirus Business Interruption Loan Scheme (CBILS).

To date, around 57,000 companies have accessed financial support through the CBILS, with roughly £12.6 billion having been distributed from it over the course of the past few months.

More than a million businesses have also taken on emergency loans with the backing of government via the Bounce Back Loan scheme, which involves credit being extended to companies on the basis of 100 per cent state guarantees.

Chris Wilford from the Confederation of British Industry (CBI) has described the expansion of the government’s small business loan scheme as “an important step” and one that will provide “critical support” for a good number of small firms across the UK.

Mr Wilford went on to explain that the EU’s state aid rules were introduced fundamentally to restrict governments from bailing out companies that were demonstrably failing but, in practice in 2020, they’ve ended up stopping much needed support getting through to businesses desperate for loans because of the pandemic situation.

“These eligibility hurdles have been a real stumbling block for many firms across the UK throughout the crisis,” said Mr Wilford from the CBI.

“They have had a real impact on the ability of some high-growth firms and those with more complex structures being able to access the loan schemes. More jobs and livelihoods will be now be saved.”

Keith Tully

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Keith Tully
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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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