Extension Of The Covid-19 Loan Schemes – MHA MacIntyre Hudson Comments

Following the news that the Chancellor is looking to extend the application deadline for the four Covid-19 business relief schemes, Gregory Taylor, Head of Financial Solutions at MHA MacIntyre Hudson, says this is the right move but lending is still too restrictive:

“The four government Covid-19 loan schemes (CBILS, CLBILS, BBLS, & The Future Fund) were due to start winding down in just over a week’s time. Pushing the application deadline back is good news for UK businesses of all sizes and definitely the right thing to do with the possibility of another national lockdown on the horizon, which would badly affect business.

“Hopefully Rishi Sunak will take this opportunity to reform the schemes to improve the success rate of applicants. The overall approval rate is too low at 63%, and this number is skewed by the Bounce Bank Loan Scheme, which is running at an 82% approval rate, the most successful of the schemes in deploying liquidity. The Bounce Back scheme only provides loans of up to £50,000 though and the more substantial CBILS scheme which larger SMEs desperately need access to is only running at a 49% approval rate.*

“One way the government could increase approval rates would be to allow banks to make loans at 4 times a company’s EBITDA. This is the tolerance that non-bank lenders employ, and would allow many more businesses to benefit. Banks are currently only making loans up to a value of 1.7 times EBITDA, prohibiting many businesses from getting the support they need.”



*Source HMRC Covid-19 business loan statistics