This is what the government-owned British Business Bank has to say about the new loan guarantee facility of £330 billion for UK businesses, and how smaller businesses may access it:
HOW DOES A SMALL BUSINESS APPLY FOR A CBILS-BACKED FACILITY?
It's simple to apply and should take no longer than a standard application. Any small business interested in CBILS should, in the first instance, approach one of the 40+ accredited lenders with their borrowing proposal.
If the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so. Where the small business has a sound borrowing proposal but insufficient security, the lender will consider the business for support via the scheme.
Disclaimer: We are in the process of defining and agreeing the scheme's details, specifications and eligibility and therefore information is subject to change. We will be updating our webpages to reflect any potential changes to CBILS as and when they are published.
Decision-making on whether a business is eligible for CBILS is fully delegated to the 40+ accredited lenders.
Please note:
- The CBILS guarantee is to the lender and not the business
- As with any other commercial transaction, the borrower is always 100% liable for repayment of the facility supported by CBILS
CBILS ENQUIRIES:
CBILS decision making is fully delegated to the accredited lenders. Any queries from a business with an active or historic EFG facility, including guarantee fee collection or alterations to their repayment profile should raise them with their lender, and not with the British Business Bank.
So let's be clear about three key issues.
First, the guarantee is to the bank. None fo the support actually goes to the business.
Second, the business has to prove it can repay the loan as not all the facility is guaranteed and the bank is not going to provide any lending without security - which right now is going to be in very scarce supply indeed.
Third, what this means, I suspect is that if £1 billion of this as used by small businesses I would be completely astonished. There is not a smaller business in the country that could right now guarantee that it could repay a bank loan.
In other words, the whole government scheme is a sham. It's a support mechanism for banks. It may help some big businesses (but even then, I stress the 'may') and for small business this looks like a complete non-starter.
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CBILS is the “Coronavirus Business Interruption Loan Scheme”. More here:
* https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/our-partners/
“CBILS encourages lending to viable UK businesses that would be turned down for a loan or other form of debt finance, due to inadequate security … It does this by providing accredited lenders with a Government-backed guarantee for 80% of the facility value (subject to an annual claim limit at portfolio level).”
and
* https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/
“The Government will also cover the first 6 months of interest payments, so businesses will benefit from lower initial repayments. The business remains liable for repayments of the capital. The maximum value of a facility provided under the scheme will be £5 million pounds (the original announcement suggested a maximum value of £1.2 million.)”
Sham is a bit strong. It is a loan, which is repayable by the borrower, but with a solid guarantee under which, at its maximum, the government pays the first 6 months of interest and 80% of the principal. The business will be expected to repay the rest (and strictly speaking, will be liable for all of it, as that is the nature of a guarantee: query if the government expects to use its right of subrogation if its guarantee is called). I expect the bank will want to see a credible business plan which indicates that (assuming coronavirus goes away) the business will recover and become profitable after 6 months, and will eventually repay the loan.
But I agree, it is difficult to see how much help this will be for small businesses.
The sham is that this is £330bn of support to business
It is nothing of the sort
So basically it is a gift to the banks – guaranteed by assets which will be massively undervalued right now and with the inevitable failures these ‘cheap’ assets will belong to the bankers and they will benefit from these in the future.
It is the same old con game.
As a small business owner I would not be tempted to enter into such a contract. Better to shut immediately lay off everyone and preserve as many of my personal assets and cash as possible to start again when business returns.
How any professional business or auditor or the NAO etc can approve this daylight mugging is beyond polite words.
Agreed
And if the loans were unsecured many business owners would take the loan, transfer as much out as possible and shut down.
And be charged with fraud and a massive tax bill….get real
So what? The money would be in the economy. Unlike QE to the banks which made a bubble that they are popping and going to keep all the trillions of that bailout.
Just whinging when the small business gets to do it – some of them maybe – is complete squirrel pointing and whatabouterry. Grrrrrrr
Stunning. Simply stunning.
This is what you get when you have a bunch of idiots who get into Government to hollow it our from within because they do not believe in Government in the first place. So when it comes to the crunch you get policies like this.
And do you know what the REALLY cunning bit is? It makes Government seem ineffective to the voter so that they end up being anti-Government like the Tories too, because they think it is useless.
Very clever….ohhhhh….it’s fiendishly clever what they do……………………..hats off to them.
What does anyone expect from a government helmed by the man quoted as saying “Fuck business” and who claims vigorously to stick up for bankers? I imagine Jarvid’s seed money for the North would have been along similar lines, in reality just a way of fattening up SMEs for harvesting by, say, GRG or some similar operation.
In reality any business which actually needed to use this scheme would likely fail to qualify given the standard commercial criteria being applied. What bank would provide a business loan for a business which has
1. Seen a sudden and precipitous decline in its trade
2. Can offer no guarantees as to when normal levels of business activity may resume
3. Will almost certainly be subject to a government mandate to cease business activity (of not already in place at the time of the application).
This announcement was nothing more than an attempt to wow a complicit media with some big numbers, trying to create the impression of radical action, whilst in actuality doing almost nothing.
We have a crisis which makes all existing economic doctrine meaningless, and a government more interested in fighting to protect that doctrine, than it is trying to ameliorate the impact of the crisis. With Johnson and company in charge (however nominally), this isn’t going to end well for the UK. In fact, I confidently predict, that relative to comparable nations, in economic terms, we will fare very poorly.
Agreed
I,ve just received confirmation from my local council, Scarborough, that they will be responsible for handing out the grants mentioned yesterday. The exact process is being released 20th March .
[…] from Richard Murphy […]
Heard on the radio that a childcare provider was going to apply for £250,000 via this scheme. Not sure it is wise for that organisation.
Better that they get some relief for staff wages as a labour intensive business.
They’ll be bust soon….
Businesses need money and fast to stay afloat, to pay wages, while business is slow in the run up to lockdown and later when we are; to help them while they aren’t earning, to stop the stress of worrying about their staff and wages and overheads and how they are possibly going to cover that in the present situation. No one knows when and for how long. The government hasn’t helped renters, so if they don’t get wages they are homeless. What a shambles.
I’ve just seen on their website that the Severn Railway has – having effectively closed for the foreseeable future – launched an emergency appeal (see https://www.svr.co.uk/NewsItem.aspx?a=921), stating that essentially the government has nothing for them :”… although the Government has announced various support measures for businesses, they offer insufficient help to the SVR at present. We, like many other businesses, are not insured for business interruption caused by the pandemic and the only help currently available to us is through Government backed loans (if indeed we qualify), which would put the Railway into significant debt and would take many years to pay off.”
To put it simply, the government scheme is “borrow the best part of what you’re not being paid now (because you’ve no customers), to be repaid out of future payments (if and when the customers return), along with all your normal costs”…
I think I would regard ‘insufficient’ as a great exageration…
I have to say the wage guarantee scheme will help preserved railways quite a lot
But I did donate to the Talyllyn Railway today as I hoped to be there this weekend and will not be
There are appeals from many such organisations now and I hope to be open minded when I can