“My firm is viable – but I can’t get a loan”

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Kevin Osborne

The government must bring in urgent reforms to its coronavirus loan scheme to stop small businesses going bust.

That’s the message from MPs and firms who say loans are still being approved too slowly to help firms hit by lockdown measures.

The British Chambers of Commerce said that only 2% of UK’s firms had so far secured the loans.

The Treasury said it was taking “unprecedented action to support business”.

A Treasury spokesperson said that action included £330bn in business loans and guarantees, paying 80% of furloughed workers’ wages, giving £3bn cash grants to a quarter of million small businesses, and tax deferrals.

“The loan scheme is designed to give banks and businesses confidence, and ensure that viable businesses get the support they need.

“Approvals for the scheme have shown an eightfold increase in the last two weeks – with around 4,200 loans worth just over £800m signed off.

“We’re working closely with banks to ensure we get finance to those who need it as soon as possible and continually look to review our support to see what improvements can be made,” the spokesperson said.

Chancellor Rishi Sunak has also previously ruled out the taxpayer giving 100% backing for the loan scheme.

“When people say I should take 100% of the risk, it’s not really me it’s actually all of us, it’s the taxpayer taking 100% of the risk of the loans defaulting,” he said.

Loan problems

Ministers brought in the Coronavirus Business Interruption Loan Scheme with promises that they would do whatever it took to support firms hit by the shutdown.

Government-backed loans were to be available to all firms that were solvent and trading when the shutdown began.

The Treasury revamped the loans scheme two weeks ago, and banks said they worked through the Easter weekend to boost lending.

But some business owners have told the BBC that they have not been able to access loans or grants.

Dave Moran, who previously worked as a senior executive in the pharmaceutical industry, owns UK Challenge, which runs corporate team-building events.

For the past two years it has run at a loss as a start-up company, but was moving into profit this year, with a full order book, before the lockdown was imposed.

“Rishi Sunak said: ‘Whatever it takes’, and for me those were good words.

“If you’d spoken to me three to four months ago, our 2020 was on course to be a bumper year. Essentially we lost everything overnight. We are keeping going. I’ve not laid off staff – we’re still paying full pay. We’re in a position where our money will run out.”

He was told by his council that the business couldn’t get grants because they are a sub-tenant in a building, and his bank has not signed up to the scheme.

“You’ve got the Business Minister Alok Sharma and the Chancellor Rishi Sunak saying ‘We won’t let bureaucracy get in the way’ but that’s exactly what’s happening,” he said.

The National Association of Corporate Finance Brokers (NACFB), whose members arrange finance for thousands of small business clients, said even after a government overhaul announced two weeks ago it was still taking far too long to apply. Each application took more than five hours to get through the necessary paperwork, it said.

Paul Goodman, chair of the NACFB, said that was far too slow to allow the country’s five million small businesses access cash in time.

“The way it’s set up, banks are still having to work out whether or not they would lend to the business if it were normal times.

“That means there’s nothing for customers who have a perfectly viable business but can’t show all the banks require to get a government-backed loan.”

Gary Crosbie runs Inter-Refurb, which refurbishes pubs, hotels and restaurants – another group targeted for help.

He says he can demonstrate three years of profits, with £50,000 cash in the bank.

Yet because his bank decided it didn’t wish to support the construction industry, he failed the test that required banks only to lend according to their pre-shutdown criteria, and was rejected for a government-backed loan last week.

“My accountant said – you can put off paying your VAT. But that’s up-to-date. They said well you can put off paying national insurance – but I’d kept that up-to-date too. So for doing the right thing – I can’t get any help.”

Mr Crosbie said he wanted to keep people on but was now facing running out of cash in a profitable business owing to the shutdown.

According to the BCC’s figures, 17% of businesses had only enough cash to last a month – and 36% had less than three months’ cash reserves.

MPs on the All-Party group for Fair Business Banking say the scheme must be made much simpler and faster to prevent small and medium-sized enterprises from going under.

Kevin Hollinrake, who chairs the group, said: “We’ve seen many more loans being approved – which is clearly great news.

“But we need the process to be simpler and faster in terms of getting this money into bank accounts.

“We also need better data on a daily basis to see the numbers of applications being made, the numbers being refused and the numbers being approved. We only have days to get this right.”

He said that next week many small businesses will have to make payroll and supplier payments.

“We need to get this money into business bank accounts this week or we’ll see lots of small and medium-sized enterprises start to go bust from next week,” Mr Hollinrake warned.