The DMA has welcomed Government changes to the Government-backed coronavirus emergency loans, although is still pressing Whitehall to go further for businesses suffering from the Covid-19 lockdown.
The trade body said: “Dozens of DMA members wrote to share their negative experiences with their banks when applying for a Coronavirus Business Interruption Loan Scheme. Across the board, members have been shocked by the personal guarantees and interest rates they are being asked to agree. Many members who were asked for personal guarantees shared correspondence from Lloyds, Barclays and HSBC, in particular.”
The Government has since said it will be overhauling the CBILS, and among other measures will remove the requirement for personal guarantees for loans under £250,000 and the removal of the requirement to demonstrate businesses have no other means of funding.
Where loan requests are between £250,000 to the £5m cap, the personal guarantees will be limited to 20% of the total loan, as the Government will assume the remaining 80% of the risk, while it has ordered banks to remove the option to offer their own commercial alternatives over the CBIL as the first available option.
Banks have also been warned not to charge excessive interest after the free period, while the CBILS will be extended to offer loans of up to £25m for firms with value between £45m and £500m.
DMA public affairs manager Michael Sturrock said: “These are welcome changes, though personal guarantees of 20% of loans from £250,000 to £5m still expose small to medium sized business owners to a great deal of risk. The DMA has been in contact with the Department for Business, Energy & Industrial Strategy, the Department of Digital Culture, Media & Sport and the Treasury to push for more gives from the Government.”
Meanwhile, writing in The Sunday Times, the founder of creative workspace business Second Home Rohan Silva said: “The truth is that it’s absolute carnage for small businesses. Revenues are plummeting as companies stop paying suppliers to conserve cash, with ripple effects cascading through the economy, hitting small businesses and freelancers hardest of all.
“I have been trying to apply for [CBILS] funding but I haven’t been able to submit an application yet, let alone receive any money. We contacted HSBC and NatWest, only to be told they were accepting applications only from existing customers. We then tried some of the other financial institutions certified by the Treasury for handing out these loans, to find that they covered just certain parts of the country – or were allowed to lend only relatively small amounts of money.
“Small business owners will have endured many sleepless nights over the past few weeks, worrying whether the countless hours they’ve put into building something from scratch will be for naught. I know this, because I’m in the same boat. If [the Chancellor] can fix his policies – and fast – entrepreneurs will be on the streets applauding him. If not, they’ll be awake for many more nights.”
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