The federal government is planning an ongoing state-sponsored small enterprise mortgage program
The government plans to replace existing support for coronavirus businesses with a permanent state-sponsored small business loan program.
Under the plan, due to be launched in January, the government would guarantee 80 percent of loans to small businesses, ranging from a few thousand pounds to 10 million pounds per company over a six-year period.
In fact, the new government-sponsored SME loan program would expand the Coronavirus Business Interruption Loan Scheme (CBILS), but with a lower threshold. The minimum loan for CBILS is £ 10,000.
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According to the Financial Times, banks would set their own rate on their loans, but the rate – just like the CBILS – is likely to be capped at around 15 percent, which is well above the 2.5 percent fixed rate of the parallel bounce- Back Loans Scheme (BBLS).
Research by our sister company GrowthBusiness found that lenders charge between 3 and 15 percent for CBILS loans.
Since last month, the CBILS and BBLS have given away £ 60.64 billion to companies in trouble.
And the new state-backed SME lending system would have stricter lending criteria than the BBLS, which has been criticized for just waving loan applications in the government’s rush to support businesses.
It would be controversial that the government-sponsored replacement SME lending system would reintroduce an element of personal guarantee to borrowers, which means they could lose their home or other assets if they fail to keep repayments. When the CBILS was introduced in March, banks were beaten for insisting on personal guarantees.
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The government-sponsored small business loan program is also expected to support revolving facilities such as overdraft facilities and asset financing facilities.
Douglas Grant, director of CBILS lender Conister, said: “We fully support the UK government’s plans to launch a permanent replacement for the £ 65 billion Covid loan program in support of SMEs that are faced with of changing consumer behavior have already shown an exceptional level of adaptability and strength. “
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