In a statement to the House of Commons on April 27, 2020, the UK Chancellor of the Exchequer announced another loan scheme designed to help businesses ‘bridge’ the economic disruption caused by the Covid-19 pandemic.
Alongside CCFF, CLBILS and CBIL, the new scheme is aimed at very small businesses that would otherwise not have been able to access credit. The scheme, called Coronavirus Bounce Back Loan Scheme (CBBLS), will provide ‘micro-loans’ to entrepreneurial small businesses which the government considers ‘businesses most at risk from the impact of coronavirus’, but which will be of significant crucial during the UK’s economic recovery as the crisis subsides. It is expected to bolster the availability of cash grants, business rate reductions and the three-month VAT deferral, also all previously announced.
CBBLS will allow a business to borrow amounts equal to the greater of 25% of its turnover and £50,000. Interest on the loan will be paid by the government for the first 12 months. It is important to note that unlike any other program available, loans under the CBBLS will be 100% guaranteed by the government. In addition, perhaps due to the level of funding available, but also, perhaps, given the start-up problems experienced by the schemes that preceded it, the CBBLS will not be subject to any eligibility criteria or conditions. prerequisite for continued viability. The Chancellor promised that the request would be made via “a simple, fast and standard form”.
CBBLS will launch at 9:00 a.m. on Monday, May 4, 2020. Cash must then be paid to applicants within 24 hours.
The availability of additional fully guaranteed government loans, for businesses least able to access credit through “normal” channels, will be widely welcomed. However, a few points to note. First, previous government regimes have all struggled to get money to people in need quickly and efficiently. It is to be hoped that the removal of eligibility criteria will help to facilitate the operation of the new regime. And second, CBBLS is yet another loan program; while it provides businesses with the immediate cash they need, it does so by incurring additional debt that over time will need to be repaid (or restructured). The accumulation of such levels of debt by small, perhaps embryonic, companies should not (regardless of current circumstances) be contemplated without fully appreciating longer-term considerations.
© Copyright 2022 Squire Patton Boggs (USA) LLPNational Law Review, Volume X, Number 119