Small firms hit by coronavirus could miss out on bounce-back loans

Only eight banking groups have so far been authorised to handle applications for the government’s new 100% bounce-back loan scheme, and most are restricting loans to their own business customers – raising fears that many small businesses could be locked out of the scheme.

HSBC and RBS are accepting external applicants for the emergency cash loans, but they are still prioritising their own account holders.

The restrictions raise fears that struggling businesses that do not bank with the largest lenders, which also include Lloyds, Barclays, and Santander, risk having to wait weeks to access cheap government cash at a time when speed is key to the survival of many businesses, as the UK remains in lockdown due to Covid-19.

“The low number of accredited lenders is troubling as it could see firms who use other lenders effectively locked out of the scheme,” said Suren Thiru, head of economics at the British Chambers of Commerce. “This concern is likely to be exacerbated by the current squeeze on capacity of approved lenders to meet demand from their existing customers.

“The UK government and the British Business Bank must pull out all the stops to ensure the scheme has sufficient capacity to meet demand. This should include an expedited process for accrediting new lenders, including specialist non-bank lenders such as fintech firms.”

Small businesses have been scrambling to apply to the new scheme, which offers loans worth up to £50,000 at an interest rate of 2.5%. The first 12 months are payment and interest-free. More than 170,000 applications have been submitted since Monday morning. Lloyds confirmed it had delivered 32,000 loans worth £1bn to business accounts by Tuesday afternoon.

While the bounce-back loan scheme was launched in haste, far fewer lenders have been lined up to dole out the first batch of small emergency loans compared to the original coronavirus business interruption loan scheme (CBILS). That first programme launched on 23 March with 40 approved lenders, which has since risen to 49.

The state-owned British Business Bank, which is managing all of the government’s coronavirus loan schemes, is in charge of lender accreditation. It says all of the CBILS lenders have been invited to apply for bounce-back loan accreditation, but will not confirm how many are in the pipeline. “The British Business Bank is accelerating the onboarding of new lenders at pace to further extend the scheme’s reach,” a spokesman for the BBB said.

The process has been speeded up since the start of the coronavirus crisis, but the BBB only has 25 staff working on accreditation.That compares with two at the start of the coronavirus outbreak, but it is not recruiting additional staff to help with the process.

However, customers of accredited lenders are still reporting problems. A number of business owners contacted the Guardian to say that they have not been able to submit forms on the Barclays site. A spokesman for the bank said the “vast majority” of customers had been able to apply online, but some businesses needed to provide extra information or additional signatures before the full application could be processed.

Mike Cherry, national chairman of the Federation of Small Businesses, said initial feedback on the scheme was mixed. “Some have submitted their short application forms with no trouble at all, others have been told to wait for forms to arrive, and some have struggled to make an application due to site failures,” he said.

“From here, full transparency is a must. All accredited banks should be publishing details on applications, approvals and declines – as well as the speed with which money is reaching accounts after approval – on a regular, coordinated basis”

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