Enterprise teams and MPs have warned that plans to increase the federal government’s bounceback mortgage scheme to assist companies survive the second coronavirus lockdown will probably be undermined except lenders open accounts for struggling first-time debtors.
Senior bankers have additionally flagged the chance of an “operational nightmare” when the extension begins on Monday as they work out the main points of how present bounceback debtors can ‘prime up’ loans to the complete £50,000 earlier than the programme reopens.
Earlier this week, the federal government prolonged its loan guarantee schemes from November till the top of January to assist UK corporations with their money circulation through the second nationwide lockdown. For the reason that schemes opened in Might, greater than £60bn has been lent by banks to about 1.4m companies, the bulk via the bounceback mortgage scheme (BBLS).
The massive 5 excessive avenue lenders — Barclays, HSBC, Lloyds, NatWest and Santander — have accounted for about 90 per cent of the bounceback scheme to date however usually are not taking over new prospects. They complain of being inundated by demand from struggling small companies for the loans of as much as £50,000, that are curiosity free for a 12 months and are totally assured by the federal government.
Nearly the entire so-called ‘non-bank lenders’ which might be accredited underneath the BBLS are additionally proscribing entry to new purposes.
Kevin Hollinrake, conservative MP and co-chair of the all-party parliamentary committee on truthful enterprise, mentioned it was unacceptable that “so many companies — we take into consideration 250,000 — are utterly locked out of the scheme”.
He mentioned this was as a result of non-bank lenders do not need entry to funds to supply loans, whereas the larger banks, which do have the funds, had been unwilling to open new enterprise accounts. Mr Hollinrake is in talks with the chancellor, Rishi Sunak, and Metropolis minister John Glen to attempt to discover a answer.
Officers have privately made clear to lenders that they need to open to new prospects as quickly as it’s operationally attainable for them to take action, in accordance with one particular person conversant in the Treasury’s place.
Bankers on Wednesday mentioned that they had been in talks with Treasury officers and the British Enterprise Financial institution, which administers the scheme, on what the extension will imply for patrons and new candidates.
HM Treasury mentioned: “We’re working intently with banks to make sure that debtors who want them can entry loans underneath the scheme.”
The extension of the mortgage schemes till the top of January was a element of the most recent spherical of help to assist companies survive forced-closure through the UK’s second nationwide lockdown.
Craig Beaumont, chief of exterior affairs on the Federation of Small Companies, mentioned: “We’re searching for banks to step up and permit new prospects to use who didn’t know they wanted the cash within the first wave. Clear, constructive coverage route from the chancellor must be matched in supply from the banks.”
The British Chambers of Commerce additionally wrote to UK banks final week calling for help for small companies.
However banks are cautious that companies that haven’t taken loans to date could possibly be probably the most dangerous, with the Nationwide Audit Workplace already warning that taxpayers might lose as a lot as £26bn in fraud and default.
Banks have pledged to honour a separate transfer by the federal government to permit present bounceback mortgage debtors to ‘prime up’ their loans to the complete £50,000. One banker mentioned important demand was anticipated amongst these seeking to “double dip” as a result of that they had not taken the complete quantity through the first lockdown.
The extension till the top of January has additionally raised issues over the distortion of the small enterprise lending market, which is now nearly totally coated by government-backed mortgage schemes.
Charlotte Crosswell, head of Innovate Finance, which represents the choice finance sector, mentioned that non-bank lenders who usually are not accredited lenders, which lack entry to low-cost Financial institution of England funding, had been liable to being shut out of the marketplace for longer.
“We now have to search out methods to help companies which have been closed down within the lockdown and concentrate on longer-term SME financing to assist financial restoration,” she mentioned.
— to www.ft.com