Covid-19: business loan scheme extended to £200m

The government has extended the maximum loan size available through the coronavirus large business interruption loan scheme (CLBILS) from £50m to £200m, but with restrictions placed on dividend and bonus payments by borrowers

The expanded loans will be available from 26 May. They are intended to help ensure large firms who do not qualify for the Bank of England’s covid corporate financing facility (CCFF) have enough finance to meet cashflow needs during the outbreak.

Companies borrowing more than £50m through CLBILS will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan, including a ban on dividend payments and cash bonuses, except where they were previously agreed.

These restrictions will also apply to CCFF participants who wish to borrow money beyond 12 months from today. The Bank will also publish a list of companies who have benefitted under CCFF from the scheme on 4 June.

Under the new arrangements, CLBILS applicants will be able to borrow up to the lower of 25% of turnover or £200m. Lenders who wish to offer larger loans will need to undergo further accreditation checks.

The restrictions in place mean borrowers cannot make any dividend payments and will need to agree any share buybacks.

In addition, companies using the scheme cannot pay any cash bonuses or award any pay rises to senior management (including the board) unless they were declared before the CLBILS loan was taken out, are in keeping with similar payments made in the preceding 12 months, and do not have a material negative impact on the borrower’s ability to repay the loan

John Glen, economic secretary to the Treasury, said: ‘We’re determined to support businesses of all sizes throughout this crisis and our loans and guarantees have already provided over £32bn to thousands of firms.

‘Today we’re increasing the maximum loan to £200 million to make sure companies get the help they need.’

To date, the government has provided 268,000 bounce back Loans worth £8.3bn, 36,000 loans worth over £6bn through the coronavirus business interruption loan scheme, and £359m through CLBILS, alongside £18.7bn through the CCFF.

Rain Newton-Smith, CBI chief economist, said: ‘Some mid-cap businesses urgently need access to larger loans to tide them over at this critical juncture for the economy.

‘Many of them are important regional employers, so the Treasury’s extension of maximum loans to £200m shows just how much they are listening to the concerns of business right now.

‘Bounce back loans are the standout success so far among government packages supporting firms’ cashflow amid the crisis. Meanwhile, lenders are continuing to act at speed to get emergency funds to those businesses most in need.’

Information on the coronavirus large business interruption loan scheme (CLBILS) 

Information on covid corporate financing facility (CCFF)

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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