Restaurants will be able to apply for coronavirus business loans until the end of November, under new Treasury plans set to be unveiled this week. The government will extend its four coronavirus business loan schemes, according to the Financial Times, as it responds to fears of a targeted lockdown and ensuing loss of revenue in hospitality businesses.
The most pertinent scheme for many restaurants is the bounce-back loan, which Chancellor Rishi Sunak introduced in April following criticism of the Coronavirus Business Interruption Loan Scheme (CBILS). Capped at £50,000 and designed with less strenuous eligibility and viability checks than their heftier counterpart, they offered short-term money to restaurants that at the time did not know when, exactly how, or for whom they could reopen. That scheme was previously slated to end at the start of November, but will now run to the end of that month.
The CBILS was slated to end this month. Tiered by business size, its slow approval process, viability checks that asked businesses to prove that they could survive an unprecedented pandemic, and reliance on banks that were at the time understaffed and/or closed altogether made it ineffectual for many restaurants, and prompted the opening up of the bounce-back loans.
It’s also not clear whether the CBILS extension will reverse a key blockage from its introduction, whereby banks were instructed to assess restaurateurs’ eligibility for “normal” loans. The distinction between “normal” and government loans is in the guarantee. Under a normal loan, a restaurant owner must offer collateral — usually their property, whether commercial or residential — as a guarantee to the bank. Under the CBILS the government takes up the guarantee, either entirely or in part depending on the size of the business and therefore the size of the loan.
Much like the government’s extension of eviction protections for restaurants until the end of 2020, the loan extension has the air of a stay of execution. Loans are debt; more debt is something many restaurants can currently ill-afford; and with the furlough scheme still set to run out at the end of October, restaurants could find themselves borrowing money to pay staff that aren’t legally allowed to come into work — if a short-term lockdown does happen. Then restaurants would face the same situation they faced in March: take the loan and hope it arrives in time to mothball, or see how long they can stick it out. Without a joined up public health and economic policy, these plans might not help restaurants at all.