The Liberal Democrats are calling for a system that would impact licensees who have experienced at least a 30% drop in revenue during the pandemic.
Under the policy, pubs would receive up to six monthly grants.
The sum of each grant would depend on the drop in turnover compared to the same month pre-pandemic.
There was close to £3bn in unsettled rent in the hospitality sector, the party said.
Act now
Sir Ed Davey called on Prime Minister Boris Johnson and Chancellor Rishi Sunak to “act now or risk the closure of thousands of Britain’s locals.”
"Without a proper package of help it will be last orders for many local pubs,” he said.
"Thriving businesses that were once the heart of our community must not be forced to close through no fault of their own."
Davey described the Government's existing support for pubs and restaurants as "pint-sized" and "bottom of the barrel."
He continued: "In the last recession the Government bailed out the banks, now it's only right we bail out our pubs.
Drowning in debt
"They are drowning in debt, driven by rent costs they have no hope of meeting, and the Government’s offer to them has been pitiful."
The Government ban on commercial evictions was extended by a further three months to 30 June.
Several hospitality voices have called for this to be further extended until the autumn, to give businesses time to rebuild trade in the warmer months.
For residential tenants, the ban on bailiff-enforced evictions in all but the most serious circumstances – such as fraud or domestic abuse – and the requirements for landlords to provide six month notice periods to tenants before they evict will also be extended until at least 31 May.
