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Banks working at “breakneck speed” – industry reacts to revamped business loans

Trade bodies and advisory firms have backed the revamped criteria for business interruption loans, though some warned of the uncertain fates for SMEs that were already struggling before the lockdown.

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A host of business and lender trade bodies responded today to the chancellor’s announcement of more drastic measures to support firms impacted by Covid-19, including widening access to the Coronavirus Business Interruption Loan Scheme (CBILS) and creating a new scheme for larger firms.


As part of the bolstered scheme, lenders will be banned from requesting personal guarantees on loans under £250,000.


While several media reports had claimed that banks were seeking personal guarantees for the loans, ITV’s political editor Robert Peston has since reported that the banks were themselves lobbying the Treasury, during the past two weeks, to remove the need for personal guarantees.


A new scheme has also been launched for larger firms, which will involve a government guarantee of 80 percent to enable banks to issue loans of up to £25m, to firms with an annual turnover of between £45m and £500m. Credit Strategy has reported on the full changes.


Under changed eligibility criteria, applications will also no longer be limited to businesses that have been refused a loan on commercial terms.


In its response to the extension, UK Finance notably emphasised, twice, that lenders have been working with the government to ensure the loans assist “viable” businesses.


Chief executive Stephen Jones said: “Lenders are working hard to get money to all viable businesses who need it as quickly as possible. In addition to the millions of pounds of commercial lending being made available to help SMEs, lenders have already provided over £90m to businesses supported by the CBILS and tens of millions are now going out the door each day.


“This was a new scheme delivered at pace and this will always mean there are issues that need to be addressed. Lenders have been working closely with government since implementation to ensure the scheme can operate in the best way possible to get money to viable businesses that need it.”


CBI director-general Dame Carolyn Fairbairn said the measures will “deliver cash faster to firms battling for survival in the headwinds of the pandemic.”


She added: “By providing more support for mid-tier companies, they are backing our most significant and iconic regional employers. These firms number in the thousands and make a huge contribution to the economy, so it’s good to see them getting the support they deserve. More detail and a clear time frame are still needed, but this plan is hugely welcome.


“Alongside, banks are working at breakneck speed to deliver loans to firms most in need.”


"There remains an element of pot-luck in so far as who you bank with, and the government appears willing to let other businesses fall by the wayside"


Carl Jackson, managing partner at business advisory firm Quantuma, said: “While on the surface this appears to be a significant improvement to processes and a response to banks taking advantage of business owners, in practical terms, this is a limited change.


“The major change to personal guarantees is that for borrowers seeking more than the £250,000 threshold, any liability is capped at 20 per cent of the loan not secured by the government.”


Jackson added: “These measures still do not address the thousands of businesses that were showing signs of stress before the crisis – businesses that are now likely to be those most in need and struggling to stay afloat.


"Banks will also continue to look after their own customers as a priority, meaning there remains an element of pot-luck in so far as who you bank with, and the government appears willing to let other businesses fall by the wayside.”

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