EU Lets Struggling Small Businesses Use UK Virus Loans

By Najiyya Budaly
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Law360, London (July 30, 2020, 12:13 PM BST) -- The European Commission has approved changes to British state aid rules that will allow more small businesses struggling with the economic fallout of the coronavirus crisis to access loans, the U.K. government said Thursday.

The European Union's executive arm has waved through measures that will allow smaller companies that are classified as "undertakings in difficulty" to apply for government-backed loans of up to £5 million ($6.5 million) during the pandemic. Previously, businesses with high levels of debt and losses at the end of 2019 were barred from accessing the coronavirus business interruption loan programs.

But the U.K. government said that it has lobbied Europe alongside industry groups — including the Confederation of British Industry and the British Private Equity & Venture Capital Association — to relax the rules, which fall under the European Temporary State Aid Framework. The changes mean that struggling "micro" businesses with fewer than 50 employees and an annual turnover of less than £9 million can now get access to the loans.

"Our loan schemes have been a key part in supporting businesses enabling them to bounce back as we kick start the economy," said John Glen, economic secretary to HM Treasury. "I'm delighted that our work with the commission has paid off so we can further support the smallest businesses."

Both Glen and Paul Scully, the minister for small business, have written to U.K. lenders about the changes to ensure that they are providing loans to more businesses.

"We have stood by business throughout this crisis, and today's announcement will mean that even more small firms will be able to access much-needed financial support," Scully said.

The government announced the so-called bounce back loan program in April to allow small companies and sole traders to borrow up to £50,000 during the coronavirus pandemic.

Chancellor of the Exchequer Rishi Sunak announced the business interruption loan scheme in March, which offered loans of up to £5 million for businesses with turnover of £45 million or less.

That was extended to larger companies, which could secure loans of up to £25 million, while businesses with turnover of more than £250 million could gain loans of up to £50 million.

The Treasury said Thursday that over 57,000 British businesses have so far benefited from £50 billion of government-backed loans.

--Editing by Rebecca Flanagan.

For a reprint of this article, please contact reprints@law360.com.

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