The Government has written to banks urging them to act on a change in EU state aid guidelines that should enable more small firms to access coronavirus loans.

The change, which the IoD led calls for, means that small and micro businesses – meaning fewer than 50 employees and turnover less than £9 million – will be exempt from elements of the ‘undertaking in difficulty’ test, and are now eligible for the Coronavirus Business Interruption Loan Scheme.

Allie Renison, Head of Europe and Trade Policy at the Institute of Directors, said:

“This is a welcome move towards helping more British businesses access much-needed finance. The UID test has caused a lot of frustration, and the IoD has been knocking hard on the door of both government and Brussels to secure this change.

“CBILS will continue to be an important lifeline for firms, especially as some have fallen through the gaps of relief schemes that are now winding down. Many viable smaller companies who have focused on growth rather than specific lending criteria have been turned down on account of the UID rule so we hope they will now be able to reapply.

“The onus is now on lenders to heed this development and ensure support reaches where it needs to be. As companies look to reopen and restart operations, cash will be tight, so it can’t come soon enough. It’s crucial that Government provides sufficient clarity and guidance in its own criteria to lenders to ensure there are no further hold-ups.”