Housebuilders will be able to apply for short-term loans of up to £1m from the Scottish government to support them through the Covid-19 pandemic.

SME housebuilders with liquidity issues due to the temporary closure of the housebuilding sector will be able to apply to a £100m Scottish government emergency loan fund which aims to:

• Safeguard jobs and protect suppliers;
• Support post-Covid-19 economic recovery and the continued supply of homes;
• Retain diversity of the housebuilding sector.

Applicants should be a SME housebuilder with a turnover of £45m or less per year and building five or more homes per annum. They should only apply for funding that is necessary for the short term. They will be asked to explain why existing support mechanisms are not sufficient for their business.

Loans are capped at £1m, and most loans are expected to be repaid within two years with interest rates set at 2%. The minimum loan amount is £50,000.

Scottish housing minister Kevin Stewart said: “To save lives and protect the NHS during the coronavirus outbreak all non-essential construction work has been halted. This decision was not taken lightly and I know it is having a profound impact on the housebuilding sector, particularly smaller businesses which are struggling to cope with delayed house sales and the increased costs associated with site shutdowns.

“This new loan fund is open to small and medium-sized housebuilders operating within Scotland. It will provide urgent support to address liquidity pressures facing housebuilders and will help ensure their future.

“I would like to thank everyone in the sector for their support during the coronavirus pandemic and assure them that the Scottish government is committed to safeguarding jobs and putting plans in place to ensure economic recovery over the months and years ahead.”

Homes for Scotland chief executive Nicola Barclay said: “This welcome short-term intervention will offer a lifeline for many smaller home builders who play a major role in their local areas in terms of meeting more rural housing need, investment, employment and sustainability.

“Of course, their longer-term survival depends on a safe phased return to work and we continue our close engagement with the Scottish government on how this can be achieved as soon as possible.”

SME housebuilders will be able to apply for loan support from 2pm on Monday 18 May on the Scottish government website. Full details on the criteria for the fund will be available at that point.