Most Coronavirus Emergency Bank Loan Applications Still Rejected

Most Coronavirus Emergency Bank Loan Applications Still Rejected

EXCLUSIVE: Most coronavirus emergency business loan applications are still being rejected, despite the program overhaul by Chancellor Rishi Sunak.

Fifty-three percent of Coronavirus Business Interruption Loan Program (CBILS) loan applications were rejected, according to a survey of Small business readers – despite the Treasury relax the diet April 3.

Previously, large banks followed government guidelines that emergency coronavirus business loans should only be offered to small businesses that would not qualify for a business loan.

The paradox is that the banks have been asked to lend to companies they would normally refuse – and that they are still at the mercy of the 20 percent of the CBIL that the government has not guaranteed.

Banks have long been reluctant to lend to small businesses, with only 2 percent of loans going to SMEs, because they lack the collateral banks seek.

Small business surveyed 1,823 small businesses, 53% of which said their coronavirus loan application had been turned down since April 3, when the program was overhauled.

the The investigation rings with the admission of business secretary Alok Sharma on Sunday that only 4,200 loans worth 800 million pounds have been granted, despite more than 300,000 inquiries.

This is a conversion rate of only 1.5 percent.

(According to Channel 4, the number of actual applications is much lower – just 20,000, which means that one in five loans are actually approved.)

Still, there are 5.9 million small businesses in the UK struggling to survive during the coronavirus pandemic.

The Treasury is under increasing pressure to fully guarantee emergency loans to cash-strapped small businesses, like Germany and Switzerland, and guarantee 100% rather than 80% of loans, which means that ‘he would bear all the losses if the companies could not pay off the debt and cannot redirect to Payday Now. It is hoped that this will speed up the approval as the banks would not be exposed to any risk of default.

How the Swiss diet works

Switzerland has made 10 billion francs (8.6 billion pounds sterling) available to small businesses covering 10 percent of turnover up to a ceiling of 500,000 francs (400,000 pounds sterling), repayable under form of a five-year interest-free loan.

Business owners fill out a form with six basic questions that they submit to the bank, and the loan must be paid into a business account within 24 hours.

Most active NatWest / RBS lender

Almost three-quarters of emergency funds for small businesses are loaned by the Royal Bank of Scotland / NatWest.

The RBS group approved 70 percent or 2,500 loans through CBILS.

RBS is considered the only major bank offering CBILS loans worth less than £ 25,000 to qualifying small businesses, although both Lloyds and HSBC are working to do the same.

Speaking on Sky’s Sophie Ridge on Sunday program, former Bank of England Governor Lord King said it was clear “something was wrong” with CBILS.

Lord King said: “I am worried about this because the economy will only recover quickly if we can keep the businesses that were there and start to operate.

“It’s about getting things done on the pitch. And I think for example that if we find so few business loans being given, something is wrong. ”

The banks have criticized the British Business Bank, which is responsible for administering the program, for delaying matters due to the microscopic examination of each loan application – which BBB relatives reject.

“They’re not sleeping,” said BBB board member the Sunday Times. “They have a certain amount of resources and work within the cost structure that they have. Trying to modernize ideas in the midst of a crisis is a very difficult thing to do. ”

On Saturday, the BBB announced that the the first two fintech, OakNorth Bank and Starling Bank, had been authorized to lend through CBILS.

Other fintechs including Funding Circle, Iwoca and Market Finance, which together have provided multi-billion pound loans to small businesses, are also hoping to gain approval to join the emergency lending scheme. this week.

Part of the problem is how overloaded the BBB is. When confinement was announced for the first time, the state investment bank had only two members in its accreditation team. This has now been increased to 25.

Oliver Prill, CEO of the Business Lender Tide, said: “So far only two fintechs have been accredited by the program, which suggests that the British Business Bank is misjudging its prioritization criteria. The UK’s thriving fintech industry has the technology to handle inquiries and make decisions quickly, while being broad in reach.

Alice P. Darby