The Treasury has been criticised for not yet providing further details on the criteria of the recovery loan scheme.
Richard Churchill, a partner in the business advisory group of tax and advisory firm Blick Rothenberg, said that despite Chancellor Rishi Sunak announcing in his 2021 Budget that the recovery loan scheme will launch on 6 April, the eligibility rules have yet to be announced.
The scheme will run until the end of the year, subject to a review, replacing the coronavirus business interruption loan scheme (CBILS), the coronavirus large business interruption loan scheme and bounce back loan scheme (BBLS), which all end on 31 March.
The new scheme, which has a maximum facility of £10m, will provide loans from £1,000 for asset and invoice finance and from £25,001 for term loans and overdrafts.
“The current Covid lending schemes end at the end of this month, but companies remain in the dark on funding options and are extremely worried about their cashflow situation,” Churchill said.
“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.
“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 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.”
Churchill also criticised Sunak for not extending the same flexibility in repayments for CBILS that has been offered under BBLS.
“Sadly, the chancellor has not learnt from the weaknesses of his previous lending schemes,” he said.
“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.”
Lee Birkett, founder of peer-to-peer lender JustUs, has said that he would be interested in taking part in the new scheme but it depends on the details which are yet to be unveiled.
“We haven’t seen many details yet of who they are allowing to take part,” he said.
“We’re definitely interested but the challenge will be in the detail, the last time we didn’t take part in CBILS because they wanted platforms to take risk. Until we know what the recovery loan scheme is we don’t know if we can take part. It’s all a bit vague.”