Only about one in 10 small business applications has been approved so far, it is claimed.
But are the taps finally opening on the UK’s coronavirus bailout loans scheme.
The Coronavirus Business interruption Loan Scheme (CBILS), launched by the Chancellor 3 weeks ago now, is supposed to help smaller companies survive the nationwide coronavirus shutdown, but many are warning the money is still not coming fast enough.
The government said on Wednesday that 2,500 small and medium-sized businesses had accessed just over £450m under CBILS. Whilst this is a significant increase, over the 2000 or so loans processed by Monday this week, the data show it has taken far longer to ramp up than equivalents in countries such as Switzerland.
Senior bankers said approvals were growing by a rate of 50 per cent every day by value as lenders scrambled to address criticism of the delivery of scheme.
Initially companies had difficulty accessing the scheme due to strict rules over eligibility, now relaxed, while underprepared high street banks struggled with delivery. But problems still remain.
We have spoken to hundreds of small company owners across the UK who just can’t get hold of their banks because of overworked call centres or local branches. Call back schemes set up by some banks, such as Barclays, are meaning business owners are waiting a week or more to even start their application.
All of these hurdles have meant that only about one in 10 applications has been processed and approved so far.
“We’re still hearing widespread complaints about customer service from those approaching their banks,” said Mike Cherry, chairman of the Federation of Small Business. “The feedback . . . is that the process is very demanding. Even those with business plans to hand have found them a trial.”
Some applicants said they were still being offered high-interest commercial loans rather than access to the government-backed scheme. Others said red tape has meant they have been rejected, with directors complaining they are struggling to provide evidence the business remains viable and can repay the loans given the uncertainty over the length of the lockdown and future earnings.
We have already seen research from the Corporate Finance Network, representing regional accountancy firms with about 10,000 SME clients, which shows that more than a fifth of SMEs will fail without access to emergency cash before the month end.
Banks have struggled to meet the sudden demand as, in effect, all SME commercial lending is being routed through the scheme causing bottlenecks.
Royal Bank of Scotland said it had approved more than 1,700 applications mainly from existing customers, providing almost half of all the scheme’s approved loans. It said it was retraining 400 staff from other areas of its business to help deal with the influx of requests.
A Barclays spokesman said the bank was “processing very significant volumes of CBILS loans” and was “confident” it was doing everything it could to get money to businesses “as quickly as possible”.
Surely we just need to simplify the process. Switzerland’s CBILS equivalent has lent more than £12Bn in less than 2 weeks, why don’t we have something similar?
The SFr40bn package of emergency loans — first announced on March 25 with 121 lenders participating — managed to disburse SFr15bn (£12.4bn) to 76,034 businesses in its first week, 28 times as much as the UK equivalent has in three weeks.
Swiss companies need only fill out a one-page form for an interest-free, government-guaranteed loan of as much as 10 per cent of their annual revenue, capped at SFr500,000. Some have reported the money is in their accounts within 30 minutes.
“Details of the Swiss scheme are literally being emailed round between bank CEOs and the government,” said one executive at a UK lender. “Why don’t we have something similar?”
Keith Morgan, head of the state-backed British Business Bank, which is administering the scheme, said it was working with lenders to process applications in batches, which should further speed up the process.
He added that the BBB was working hard to approve new banks for the scheme, which has about 40 lenders at present. “We want as much distribution as we can.”
UK bank bosses complain that they have been criticised for having to work with a system that was devised by the government to help viable companies, rather than prop up those already in trouble before the spread of coronavirus.
Referring to the Swiss scheme, one British banker said that “giving away government-guaranteed free money is the easy part” and warned that difficulties would arise when the loans came due for repayment.
But the fact is that it isn’t “free money” at all is it?
Taken and amended from the original Frustration mounts over coronavirus bailout loans scheme
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