Question to the HM Treasury:

To ask Her Majesty's Government what plans they have to assist businesses using director’s capital or loans rather than third party loans.

This question was answered on 13th May 2020
The Government has set out an unprecedented package of support for all businesses to protect against the current economic emergency, including the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS), which can all be accessed by directors.

CBILS is available to all viable UK-based businesses with a turnover of less than £45m. It is particularly suited to businesses looking to mitigate against short-term cash flow difficulties, for example by accessing bank lending and overdrafts. By providing an 80% government guarantee on finance facilities up to £5 million, this scheme will help more businesses access the finance they need.

No lender can take a personal guarantee for a loan of less than £250,000 that is supported by the Coronavirus Business Interruption Loan Scheme. For loans over the value of £250,000, a personal guarantee can only be taken for 20% of the outstanding balance. However, a lender is not allowed to take a personal guarantee against a borrower's principal residence under the scheme. So even if a personal guarantee is required under the lender's credit policy for loans over £250,000, it cannot be taken against the borrower's home.

As of 6 May, over 34,000 facilities had been approved under CBILS, supporting over £5.7bn of finance to SMEs.

BBLS launched on 4 May, offering loans from £2,000 up to £50,000 to businesses including sole traders, small partnerships and unincorporated associations. The Government will cover the first year’s interest payments, and no repayments are due by the borrower during this initial 12-month period. Thereafter, interest will revert to a fixed rate of 2.5%.

The Government has recognised that some businesses (e.g. sole traders) risk their personal assets, including their home, when borrowing as there is no distinction between their personal and business assets (as there would be for limited liability companies). Therefore, a sole trader’s primary residence and vehicle cannot be pursued should a borrower default on a loan in the BBL Scheme.

As of 6 May, nearly 160,000 facilities had been approved under BBLS, supporting almost £5bn of finance to SMEs.

CLBILS is available to all viable UK-based businesses with a turnover of more than £45m. The government is providing a guarantee of 80% on finance facilities up to £50m This scheme responds to concerns from businesses that are not eligible for CBILS.

As of 6 May, 48 CLBILS loans worth nearly £290m had been approved.

Further support available to businesses includes the Coronavirus Job Retention Scheme, business rate holidays and grants to SMEs. These measures will support thousands of businesses to get through this and emerge stronger on the other side