Treasury plan to save medium-sized businesses by taking emergency stakes

The Treasury is understood to be considering user taxpayer money to buy equity stakes in medium-sized companies that have fallen between coronavirus schemes for small and large businesses.

According to reports, the Treasury is considering forming a “bailout taskforce” to inject funds in to at-risk businesses in exchange for equity stakes. It is thought that the focus so far has been on providing the equity via the Business Growth Fund.

The Business Growth Fund is a fund created by the government in the aftermath of the financial crisis. The government ordered banks to pay £2.5 billion to establish it and it has invested £2 billion in companies since 2011. It is owned by Lloyds Banking Group, Barclays, HSBC, Royal Bank of Scotland and Standard Chartered.

The latest plans could see substantial fresh investment into the fund, although reports suggest that banks expect the Treasury to provide the majority of the new funding. The Treasury has reportedly approached a leading City figure to head the taskforce.

The plans are seen as a move to protect companies, such as high-street retailers, that fall into the medium-sized bracket and may need more than loans to survive the coronavirus outbreak.

Currently, the Government is offering the Coronavirus Business Interruption Loan Scheme (CBILS) to help UK small- and medium-sized companies (SMEs) and recently announced the Coronavirus Large Business Interruption Loan Scheme (CLBILS).

The CBILS allows eligible SMEs to take out loans of up to £5 million from over 40 accredited lenders, with the government pledging to cover the first 12 months of interest payments and other lender-levied fees. The scheme can be used to fund acquisitions, if they are deemed to add value to the business.

Through the CLIBLS, meanwhile, the government will provide a guarantee of 80 per cent to enable banks to make loans up to £25 million to companies whose annual turnover is between £45 million and £500 million.

You can read BSR’s article on how business owners can use CBILS to fund acquisitions here and our report on last week’s CLIBLS announcement here. You can view the latest businesses for sale here.

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