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Government opens-up coronavirus interruption loans to larger businesses

Chancellor Rishi Sunak

Car retail groups with revenues of up to £500 million are now eligible to apply for funding from a new version of the Government's Coronavirus Business Interruption Loans (CBIL) scheme in a bid to drive support during the COVID-19 lockdown.

Chancellor of the Exchequer, Rishi Sunak, announced this morning (April 3) that the new scheme, referred to as the Coronavirus Large Business Interruption Loan Scheme (CLBILS), will offer government-backed loans of up to £25m to firms with revenues of between £45m and £500m.

A previous stipulation that the loans were only available to firms that had been turned down for a commercial loan from their bank - resulting in interest rates of as much as 30% - has been removed from the eligibility criteria for the new scheme.

The CLBILS should tackle the so-called ‘squeezed middle’ businesses not covered by the original measures and provides a government guarantee of 80% to loaning banks.

Loans backed by the guarantee will be offered at commercial rates of interest, but the government will not cover interest or fees in the same way as the small business scheme, AM understands.

As part of the new scheme, Government has also banned banks from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000.

Business secretary Alok Sharma said the changes to the scheme would make it easier for firms to access loans after it emerged that just 1,000 of the 130,000 loan applications submitted to date had been approved.

Chancellor, Rishi Sunak, said: "We have also listened to the concerns of some larger businesses affected by Covid-19 and are announcing new support so they can benefit too."

Sunak insisted that Government was “making great progress on getting much-needed support out to businesses to help manage their cashflows during this difficult time” with millions of pounds of loans and finance being provided to hundreds of firms across the country.

But he added: "I am taking further action by extending our generous loan scheme so even more businesses can benefit."

Responding to the Government’s changes to its CBIL eligibility guidelines today, UHY Hacker Young's head of automotive, David Kendrick, said that the move had followed lobbying from industry bodies such as the RMIF and many SME businesses with turnover in excess of the initial £45m threshold for CBILs.

The National Franchised Dealers Association (NFDA) was also quick to urge Government to extend the CBIL scheme to larger businesses, addressing the issue ahead of the full lockdown of non-essential retail businesses mid-way through last month.

“The retail automotive sector employs 590,000 people in the UK and businesses must be protected through supportive fiscal measures during the outbreak of the Coronavirus," said NFDA director Sue Robinson.

She added: “There is a real danger that if the Government is only targeting support at one group of businesses (SMEs), some big businesses will fail, causing business interruption in any case for SMEs that contract with them. The automotive retail sector needs to be protected regardless of size.

“NFDA would welcome the opportunity to further discuss with the Government the severity of the financial challenges that franchised vehicle retailers are facing”.

Commenting on the Government's revised CBIL policy today, Kendrick said: “This is welcome news for the sector as it doesn’t take much for an automotive business to breach the original £45m turnover threshold due to the value of the inventory sold.

“This morning’s announcement will be extremely well received by a huge number of our clients and contacts who have been working on cash flow forecasts, assessing how significant this lockdown and interruption is to their cash burn.

“It still remains unknown as to how long this will go on for, but we would encourage everyone to consider the governmental support during these times regardless of your funding position as ultimately ‘cash is king’.”

The availability of funding via the Government's CBIL scheme is not the only fiscal measure to be questioned by the car retail sector during the COVID-19 coronavirus crisis.

A petition arguing that commission payments from car sales should be included in the Government’s Coronavirus Job Retention Scheme wage calculations was launched by the Independent Motor Dealers Association (IMDA) late last week and attracted more than 8,000 signatures in less than two days.

The online petition has now attracted almost 24,000 signatures.



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