It has been clear since the Chancellor first announced his Coronavirus Business Interruption Loan Scheme that it wasn’t fit for purpose. Anyone involved in advising small businesses could see that straight away. I, like many others, fed that back to Treasury officials immediately, although they should have known it themselves.

Bankers are a selfish bunch and they were never going to miss the opportunity to grasp personal guarantees and charge usurious interest rates.

But it has taken two weeks for the Chancellor to act and the measures announced today still don’t go nearly far enough. The government says that the Chancellor is taking further action by extending the scheme so that all viable small businesses affected by Covid-19, and not just those unable to secure regular commercial financing, will now be eligible.

Hang on….businesses that could ‘secure regular commercial financing’ didn’t need the Scheme in the first place. So this action of extending the Scheme actually does nothing to help businesses – it just allows banks to get a government guarantee for all lending they make to small businesses in the next few weeks. All it does, in reality, is provide more support for lenders. And it will still be up to them to decide whether to lend and, if so, on what terms.

The government has also now made it clear that personal guarantees are not required to secure lending below £250,000. This should never have been in doubt. (For any borrowing above £250,000 personal guarantees will be capped at 20% of the outstanding value of the loan, as the Government is providing the guarantee for the remaining 80% of the finance). 

Politically the Chancellor had to take some action, as I mentioned yesterday, but he has obviously come under great pressure from Treasury mandarins to make what has now emerged as very slight changes: lenders will still require detailed information from businesses, the businesses will remain 100% liable for the loan and for all the reasons I gave here it will take too long in many cases for the much needs funds to come through.

Noel Guilford