I wrote last week about the CBIL, noting that although the government was offering to guarantee (to the bank) 80% of any loan, the remaining 20% was causing the banks some concern. As a result, the banks were looking to the director or owners of businesses to personally guarantee the remaining 20%. I commented that it was a very confident director who would personally guarantee any business loan in the current climate.
Business Secretary, Alok Sharma, has now announced changes to the CBIL scheme, to help make this more accessible to businesses and encourage further uptake of the support offered.
As a result, banks are now prevented from seeking personal guarantees from business owners for loans of up to £250,000. Doubtless a needed and welcomed change to business owners to enable their businesses to survive.
However, there is no cap on the interest rates which the banks can apply. In circumstances where banks can currently borrow at minimal interest rates, news that some banks are charging up to 30% interest is surely the next criticism which the government will need to address.
The Treasury said it had received more than 130,000 loan enquires from firms but fewer than 1,000 had been approved. Business Secretary, Alok Sharma, said the changes to the scheme would make it easier for firms to access loans.
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