Finally! Small firms get loans they need: £5bn lent to 160,000 businesses in just three days
Banks have handed out £5billion of ‘bounce back’ loans to Britain’s smallest businesses in just three days.
Under the Government’s Bounce Back Loan Scheme, which launched on Monday, major lenders have approved lifelines to almost 160,000 companies, according to numbers seen by the Mail.
That is an average of more than 53,000 per day.
Rethink: Chancellor Rishi Sunak was forced into a rethink after thousands of small businesses warned they would go bust without quick access to cash
The figures starkly demonstrate the reluctance of banks to lend under the original Coronavirus Business Interruption Loan Scheme.
CBILS launched on March 23, but has so far only seen 33,812 loans handed out – or just 768 per day.
And those CBILS loans to small and medium-sized businesses total around £5.5billion – not much more than the ‘bounce back’ scheme has covered in three days.
The lack of lending through CBILS sparked accusations that the banks were ‘letting the country down’ 12 years after being rescued in the last financial crisis.
As criticism mounted, and thousands of small businesses warned they would go bust without quick access to cash, Chancellor Rishi Sunak was forced to re-think the rescue scheme.
He brought in the BBLS to fill the gap at the smaller end of the business market, allowing firms to borrow between £2,000 and £50,000 at a lower cost and with no need to present complicated forecasts in their applications.
Welcoming the latest figures, Sunak said: ‘Small businesses are vital to our economy and will play a key role in creating jobs and securing growth as we recover from the coronavirus pandemic.
The Bounce Back loan scheme, which thousands of firms across the country are already benefiting from, will make sure they get the finance they need – helping them bounce back and protect jobs.’
Within hours of banks opening up their online ‘bounce back’ applications on Monday, they were swamped with hundreds of thousands of applications, showing the huge pent up demand which CBILS had failed to address.
The chasm between the success of the two schemes shows how desperate banks have been to avoid taking on extra risk as they support Britain’s small businesses through the coronavirus pandemic.
Under BBLS, the Government has agreed to bear 100 per cent of any losses which the lenders suffer, compared to 80 per cent under CBILS.
This means banks can lend more freely under BBLS, knowing that they won’t make a loss even if the borrower goes bust.
Former Treasury Committee member Lord Mann said: ‘As before, the banks are letting the country down. The taxpayer bailed them out in 2008 and they should have led from the front in this crisis.
‘As ever the banks are quick to look after themselves and slow to give British business a helping hand.’
Britain’s ‘big five’ lenders – Barclays, Lloyds, HSBC, Natwest owner RBS and Santander UK – are already expecting £6.9billion worth of loans to turn sour this year due to the pressures imposed by the coronavirus pandemic.
BBLS loans are also being approved more quickly than CBILS because the process involves running fewer checks on the business’s viability. But it is now the sheer volume of applications which is slowing banks down.
Barclays’ application portal crashed within hours of it opening on Monday, and some customers are still waiting for access.
And Natwest confirmed yesterday that some of its customers were being told to reapply because the details they entered were slightly different to those on their account – even if it was just a full stop or a hyphen missing.
The bank explained that this would not usually be an issue, but staff were so inundated with work that it was taking much longer to get round to individual problems than normal.