Businesses classed as ‘undertakings in difficulty’ were previously exempt from scheme.
The government has extended its Coronavirus Business Interruption Loan Scheme (CBILS), meaning more small businesses will be able to access loans of up to £5 million.
The government said that previously businesses classed as ‘undertakings in difficulty’ were unable to access CBILS because of EU rules. Businesses in this category and which have fewer than 50 employees and a turnover of less than £9 million can apply to CBILS.
The Economic Secretary to the Treasury and the Small Business Minister have written to accredited lenders setting out their expectation, it said. Undertakings in difficulty are usually businesses with high levels of debt and accumulated losses.
Small business minister, Paul Scully, said: “We have stood by business throughout this crisis, and today’s announcement will mean that even more small firms will be able to access much-needed financial support.Small businesses will play a vital role as we seek to recover our way of life and get the economy moving again, and it is essential we continue to support them through this difficult period.”
Businesses have benefitted from £50 billon of government-backed support with over 57,000 firms drawing from CBILS to date. This is alongside other measures in the government’s comprehensive package of support including the furlough scheme, over £10 billion of grants and generous tax deferrals.
Chris Wilford, head of financial Services Policy, CBI said: “This is an important step that will help more businesses get the critical support they need. These eligibility hurdles have been a real stumbling block for many firms across the UK throughout the crisis. These were put in place to avoid governments bailing out failing companies, but those rules were established in normal times.
“They have had a real impact on the ability of some high-growth firms and those with more complex structures being able to access the loan schemes. More jobs and livelihoods will be now be saved. The CBI will continue to work with government on further measures for firms of all sizes.”
However, Jagjit Chadha, director of the National Institute of Economic & Social Research thinktank, said: “While providing a simpler approvals process is helpful and providing support to businesses that were in difficulty in December 2019 may support some in their recovery during the pandemic, there is a danger that older businesses that should otherwise go out of business may continue to trade with even higher levels of debt, which may hold back future investment and job creation.
“It would be just as important, perhaps even more so, to consider boosting lending for new businesses and startups.”