OakNorth Bank calls for government review of business loan scheme

Eloise Hanson Eloise Hanson Uploaded 02 April 2020

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UK: OakNorth Bank is calling for several changes to the Coronavirus Business Interruption Loan Scheme (CBILS) to better support British businesses though the COVID-19 crisis.

The CBILS supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to six years.

It is available to UK businesses with a turnover of no more than £45 million per year, and the business must meet the British Business Bank eligibility criteria.

OakNorth Bank, a firm looking to be onboarded as one of 40 accredited lenders, is suggesting changes to the CBILS in order for it to have the desired impact:

  • Loans should be subordinated to any current lending.
  • The maximum term of loans should be increased from six to 10 years.
  • The government should take first loss on the loans, with banks taking 10 per cent of risk, to encourage banks on the scheme to move more quickly.
  • Complex structures should be removed - the fact that lenders need training by the British Business Bank to use the scheme illustrates the complexities. For example, to simplify credit decisions for banks and to speed funding for businesses, guarantees should be broadened and claims caps should be removed.
  • The business turnover limit should be increased from £45m to £200m, and the maximum loan amount increased from £5m to £10m, to ensure that medium-sized companies, who are too small to apply for CCFS, are protected.
  • SME house-builders and developers of vital buildings such as care homes, hospitals and affordable housing, are having to deal with their construction sites being closed, debts racking up, pre-sales falling away, and values falling. All of this will significantly impact this sector and destroy previously viable businesses and exacerbate the UK’s housing crisis further. In order to protect these businesses and ensure the UK is able to continue working towards closing the housing gap once the Covid-19 crisis has passed, they should be eligible for CBILS.

The full rules of the scheme and the list of accredited lenders are available on the British Business Bank website.

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