Chancellor to make state-backed £50m loans available under CLBILS scheme

Rishi Sunak

Ministers are this weekend preparing to overhaul an emergency loan programme for larger companies whose future has been put at risk of collapse by the COVID-19 pandemic.

It is understood that the Treasury is drawing up plans to double the interest-free sums available to businesses under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) to £50m.

Under the proposals, which are set to be signed off by Rishi Sunak, the chancellor, government-guaranteed loans of between £25m and £50m would be available to companies with turnover of more than £250m.

That would represent a change from the terms announced when the scheme was unveiled on 3 April, which said the upper threshold for lending would be £25m for companies with sales of between £45m and £500m.

Sources said on Sunday that the Treasury was also likely to remove the upper £500m turnover threshold in an effort to help even larger companies – described as ‘the stranded middle” – which cannot access a separate funding initiative operated by the Bank of England because they do not possess an investment grade credit rating.

The revised terms are not yet finalised but could be announced by Mr Sunak as soon as this week, according to insiders.

The CLBILS scheme is the larger version of the Coronavirus Business Interruption Loan Scheme, which is targeted at small and medium-sized companies with a maximum turnover of £45m.

greeing to stop demanding personal guarantees from SME customers, and Mr Sunak abolishing a requirement for lenders to first evaluate SMEs’ eligibility for other corporate loan products.

Speaking to Sky News’ Sophy Ridge on Sunday programme, Alok Sharma, business secretary, said that £800m had been lent so far under CBILS to 4200 companies.

“I have spent the last couple of days talking directly to some of the largest lenders who are part of this scheme and I have been very clear to say to them that we need to get money out of the door as quickly as possible,” he said.

“They understand that… we have set this up at pace and everyone is literally working around the clock.”

Sources said they expected the next set of figures to show “rapid growth” in the sums being accessed under the scheme.

The speed with which the emergency aid packages have been devised has prompted criticism from many SMEs which say they are being rejected by banks.

Some businesses say, though, that they are impressed at the speed with which ministers are prepared to make adjustments to the bailout programmes where there are apparent bottlenecks.

It has also been revealed that Mr Sunak was preparing to formally appoint Richard Sharp, his former Goldman Sachs boss, as a strategic adviser on the economic repercussions of the pandemic.

A further CBILS flashpoint is emerging over lenders’ rejection of loan applications by companies with private equity backers because of aggregated turnover calculations that were placing them beyond the scheme’s scope.

The dispute is significant because of the substantial chunk of Britain’s economy which is backed by hundreds of billions of pounds of private equity funding – much of it invested in companies with a turnover of less than £45m.

Stephen Jones, chief executive of UK Finance, said of the earlier revamp of CBILS: “The reforms to the scheme confirmed by the chancellor will help more viable businesses access the support they need.

“We continue to work closely with the government and British Business Bank to ensure this scheme works in the best way possible to get money to viable businesses that require it.”

Banking sources have been at pains to point out that with most branch networks closed and absenteeism at unprecedented levels because of the coronavirus outbreak, the industry has been working relentlessly to get the emergency loan schemes up-and-running.

The Treasury and UK Finance declined to comment on the anticipated changes to the CLBILS scheme.