Business Interruption Loan Scheme – Government raises concerns over lenders’ willingness to co-operate

The Government and businesses alike have raised concerns over lenders’ willingness to grant loans via the Government’s Business Interruption Loan Scheme (the “Scheme”).

Speaking at Downing Street yesterday evening, the Business Secretary, Alok Sharma, expressed his concern that lenders are continuing to offer their business loans and products on their standard commercial terms in the first instance, with interest rates in some cases being charged as high as 30%. If lenders can offer financial support to their business customers whilst utilising their own products and services and without the need to rely upon the Scheme, it appears they are continuing to do so.

One of the current terms of the Scheme states that it is at the discretion of a lender as to whether the Scheme may be used for unsecured lending facilities that are granted for £250,000 or under. For any facilities granted in excess of £250,000, lenders must establish a clear lack of security prior to offering businesses access to the Scheme. Furthermore, it would appear that lenders are continuing to make access to the Scheme contingent upon directors utilising their own property and assets as a form of security in return for obtaining an emergency bailout, which may even include entering into personal guarantees! This is clearly not what the Government had intended when offering the Scheme, as the intention behind the Scheme is to relieve the pressure that is being placed on businesses, not for this to be increased by asking directors to personally guarantee the debt.

Changes to the Scheme are imminent and it is clear that the Scheme has not been implemented as smoothly as the Government may have hoped. The Government has expressed that it intends to iron out these issues and to make the terms of the Scheme clearer in order to make access the Scheme as simple as possible.

If you need any help and assistance in relation to loans or personal guarantees, Franklins are here to help. Please do not hesitate to contact Holly Threlfall, Associate Partner in our Business Services team on 01604 828282 / 01908 660966 or email holly.threlfall@franklins-sols.co.uk.