Rishi Sunak extends government support schemes to get SMEs through lockdown and Brexit

Businesses can receive up to 10 million in new state-backed loans to help SMEs stay afloat

Rishi Sunak extends government support schemes to get SMEs through lockdown and Brexit

Businesses can receive up to £10 million in new state-backed loans to help SMEs stay afloat

With a rise in coronavirus cases and a new variant strain, London and the south-east of England have entered a Tier 4 lockdown in extreme measures to combat the spread. As the pandemic continues to wreak havoc across the country, businesses are not out of the woods just yet. Amid mass uncertainty, the government has set plans to help firms who are struggling to stay afloat during these challenging times. Chancellor Rishi Sunak has announced a new state-backed SME loan scheme to support lending by banks to a broad range of small and medium businesses.  

Under the plan, which will be launched in January, the government would guarantee 80% of loans to small businesses ranging from a few thousand pounds up to £10 million per company over a six-year lending period. The plan would extend the £65bn Coronavirus Business Interruption Loan Scheme (CBILS) which was announced earlier in the Spring. Banks will be allowed to set the interest rate for the new loans, although the rate is likely to be capped at about 15 per cent, with bankers concerned that any artificially low state-mandated rate would in effect wipe out all other small-business lending. 

The scheme is also expected to support revolving facilities, such as overdrafts, and asset finance facilities. The Treasury confirmed that the new scheme is expected to be rolled out from January next year in line with plans first announced by Mr Sunak in September’s winter economic plan. The loans were originally designed to end in September, however, ministers fear the economy is still braced for damage far into 2021. 

Ministers are concerned that many small businesses will still be severely weakened and struggle to obtain necessary financial support. On Sunday, London and areas in the southeast of England were placed into tier 4 measures in a bid to curb the spread of coronavirus. All non-essential businesses were forced to close down and all residents have been told to remain at home. This comes after a new variant of COVID-19 was discovered, which Mr Johnson said can be passed on significantly more easily. Tier allocations will be regularly reviewed, Mr Johnson said, and the next review is due to take place on December 30. The new state-backed loans will provide much-needed help to SMEs, particularly those in tier 4 areas, who have been forced to shut down on short notice with many now left on the brink of survival. 

We welcome the Chancellor’s decision to extend the loan schemes through to the end of March, Simon Cureton, CEO of Business Finance Marketplace, Funding Options said. This will undoubtedly cushion the impact of the ongoing restrictions of the tiered systems and an imminent Brexit event. Since March nearly 100,00 SMEs have closed their doors permanently and thousands are struggling to survive following the second wave. Despite the nation’s collective hope being pinned to the distribution of the vaccine next year, the long-term focus must be to shift the economy’s reliance away from the government-backed schemes post-March 2021. As the backbone of the economy, SMEs need further support which promotes greater competition, innovation and choice when it comes to their options for funding.  

 As the government looks more long term at how it can support SMEs access vital funding efficiently and securely, it’s essential that decisions are driven by a determination to boost market-based lending harnessing the collective capabilities of the alternative finance providers. The Government needs to build closer ties with the agile, tech & data-driven fintechs that are revolutionising the SME finance sector and providing innovative solutions that will be pivotal to steering UK businesses out of this difficult chapter, as the economy embarks on the journey to recovery. 

As the UK enters a second wave of the coronavirus pandemic, businesses are now facing mass uncertainty as to when it would be safe to operate again. The new state-backed loans will help thousands of struggling firms left on the brink of survival.  

Latifa Yedroudj
Latifa Yedroudj

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