The Chancellor announced in his Budget that the new Recovery Loan Scheme would be launched on 6 April, but the eligibility rules have still to be announced.
The current Coronavirus lending schemes end at the end of this month, but companies remain in the dark on funding options and are extremely worried about their cash flow situation. If you are a business that needs funding, it is very difficult to know what to do without knowing the rules of the new scheme. Apply quickly now or wait? In addition, it appears the banks will have the ability to set their own criteria.
With the pandemic impacting businesses for much longer than originally envisaged, access to additional funding is critical. Businesses face the daunting proposition of seeking to gear up their business to commence trading following the easing of lockdown, alongside commencing to make repayments of loans and deferred tax balances from the initial wave of support measures provided 12 months ago. This combination will squeeze their cash flow and will have exhausted their cash reserves to simply survive to this point.
The finer detail of the Recovery Loan Scheme is yet to be announced. Many businesses will be wary that banks are allowed to set their own rules. Many will recall the stringent tests initially deployed by the banks for Coronavirus Business Interruption Loan Scheme (CBILS) lending at the start of the pandemic. A repeat of “the computer says no” attitude of the banks will deny businesses access to funding at a crucial time as they seek to kick start their businesses as lockdown eases. Businesses need banks to step up and support them at this critical moment.
Sadly, the Chancellor has not learnt from the weaknesses of his previous lending schemes. He has not extended the repayment terms of the loans offered to 10 years. He has not provided flexibility to businesses to take payment holidays or have extended periods of interest only payments. It would appear that the Chancellor is simply unable to offer CBILS borrowers, or those under the Recovery Loan Scheme, the same flexibility that he has already offered Bounce Back Loan borrowers.
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