Coronavirus: Businesses call on banks to do more as small firms face closure
The business community has called for the UK’s banks to do more to support struggling smaller companies after it emerged that 20 per cent of all UK SMEs could shut within the month due to the coronavirus lockdown.
Any UK small business with a turnover of up to £45m a year can, under new Treasury rules, apply for a government-guaranteed loan of up to £5m.
However, there have been reports that many small businesses seeking the so-called Coronavirus Business Support Loan Scheme have either been refused or pushed to normal lending packages by banks.
The chairman of the Federation of Small Businesses, Mike Cherry, said: “A lot of members are telling us that when they enquire at their banks about the interruption loan scheme they’re either being pushed towards standard, expensive products or lenders are very slow to respond.
“The Chancellor says there have been at least 30,000 enquiries about the scheme since it launched early last week. We now need to know, bank by bank, where these enquiries were made and how many of them are translating into meaningful support.
Cherry’s comments came on the back of a letter from business select committee chair Rachel Reeves to chancellor Rishi Sunak warning that the way the loan scheme is being rolled out and being interpreted by some lenders is discouraging small and medium-sized businesses from accessing the loans:
Reeves said: “Banks need to be more proactive in approaching the British Business Bank and streamlining applications so that SMEs can access funds quickly.
“Lenders and the British Business Bank should also be coming forward with regular updates on the total amount of CBILS lending that is taking place so we can see that these monies are going through to the businesses that need them.
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“Banks were kept afloat by government and taxpayers during the financial crisis. I would urge them to play their part in helping small and medium sized businesses through this crisis.”
Tax firm Blick Rothenburg said that they were seeing that any firm that had made a loss in 2019, despite having a solid underlying business, was having its application for the scheme rejected.
Partner Richard Churchill said: “While the government have made the high street banks relax the need for guarantees below £250k, it is an example of the banks not acting in the spirit of what was said.
“The banks are offering them their commercial products at 3-4 times commercial rates and available in 45 days.
“Something needs to be done now to bridge the gap on funding and deliver funds to companies this week to avoid businesses going bust.”
Banking sector body UK Finance said: “Lenders are working hard to get financing to all businesses who need it as quickly as possible and are using the Coronavirus Business Interruption Loan Scheme (CBILS) where appropriate, with some funding having already been provided under the scheme.
“CBILS is designed specifically to support those viable SMEs who cannot meet a lender’s commercial lending requirements including where insufficient assets are available and lenders cannot use the scheme if they are able to lend under their normal criteria.