To ask Her Majesty's Government whether the guidelines issued to lenders participating in the Coronavirus Business Interruption Loans Scheme permit such lenders to require that an SME director pledge personal assets in order to receive a Government guarantee of 80 per cent on each loan; and what guidance has been issued to lenders on the terms of such lending.
The terms of the Coronavirus Business Interruption Loan Scheme (CBILS) state that Personal Guarantees of any form (whether or not these include the pledging of personal assets) cannot be used in respect of any CBILS facilities up to £250,000.
Personal guarantees for CBILS facilities above £250,000 are not required by the scheme rules. They may be taken at the lender’s discretion. If that is the case, recoveries under such guarantees are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets, if any, have been applied.
A Principal Private Residence cannot be taken as security to support a personal guarantee or as security for any CBILS facility.
These terms were updated on 3 April 2020 and will be retrospectively applied for any CBILS facilities offered since the start of the scheme on 23 March 2020. This means that any personal guarantees already taken for CBILS facilities up to £250,000 will be waived.