British government bans banks from requesting personal guarantees for emergency loans
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The British Chancellor Rishi Sunak, has banned banks from requesting personal guarantees for emergency loans to small businesses amid growing government concern that lenders have been slow in meeting demands for help.
The decision follows the rapid increase in the number of universal credit claims suggesting many small companies have already collapsed since the economy was locked down.
The Chancellor combined a new package of support for business with a warning to banks that they had to move more quickly.
Sunak announced his £330bn coronavirus business interruption loan scheme (CBILS) – under which the government underwrites loans to companies – just over two weeks ago, but has now been forced to admit that support was not arriving quickly enough and was failing to reach all the companies that required it. The chancellor said that under the revised plan:
Lenders would be banned from requesting personal guarantees – which mean borrowers often have to put their homes on the line – on loans under £250,000. The loan scheme would be extended so that it covered all small companies affected by Covid-19 and not just those unable to get commercial funding. There would be a new scheme to bolster support for larger firms not currently eligible for loans, under which the government would provide a guarantee of 80% so that banks could make loans of up to £25m to firms with an annual turnover of between £45m and £500m. The Treasury said the chancellor would be speaking to bank chief executives next week to discuss how the schemes are working and “ensure everybody is playing their part”.
