UK expands COVID loan scheme for small businesses

LONDON (Reuters) - More small British companies that were in financial difficulty before the COVID-19 pandemic will be able to access government-backed loans following a relaxation of European Union state aid rules, the finance ministry said on Thursday.

Under pressure from European industry groups, the European Commission last month changed the rules - which Britain still follows during its Brexit transition period - to allow more small firms to receive help.

"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," small business minister Paul Scully said.

The state aid rules originally prevented many loss-making companies from accessing government help, a measure that in normal times stops governments from propping up uncompetitive companies to the detriment of firms in other countries.

Britain's finance ministry said the changes to the state aid rules would "make sure that small businesses who are not insolvent or receiving rescue aid can benefit, enabling them to bounce back and kickstart our economy".

More than 57,000 companies have borrowed 12.65 billion pounds of government-backed loans worth up to 5 million pounds each via the government's Coronavirus Business Interruption Loan Scheme, which is aimed at small and medium-sized businesses.

CBILS is open to businesses with annual sales of up to 45 million pounds. The expansion of the scheme to include 'businesses in difficulty' - a category that includes those with heavy losses - applies to firms with sales of up to 9 million pounds and no more than 50 staff.

Smaller businesses eligible for the government's Bounce Back Loan Scheme, which has lent 33.68 billion pounds, were already exempt from the bar on firms in financial trouble.

(Reporting by Andy Bruce, editing by David Milliken)