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UK emergency loan schemes under pressure as new lenders added

As governments and lenders around the world continue to roll out emergency financing schemes to keep businesses afloat during the COVID-19 pandemic, some of the response from the UK is coming under scrutiny.

Establishing the infrastructure to support emergency loan schemes is critical. As such, the British Business Bank recently announced that it has approved three new lenders for accreditation under the Bounce Bank Loan Scheme. The scheme is intended to target small and micro businesses, with loans from £2,000 up to 25% of the business’ turnover with a maximum loan of £50,000.

AIB Group (UK) (trading as Allied Irish Bank (GB) and AIB (NI)), The Co-operative Bank and Starling Bank join TSB who were also accredited this week. They will be able to provide financial support to smaller businesses across the UK that are losing revenue and seeing their cash flow disrupted, as a result of the COVID-19 outbreak.

Following their approval, these three lenders will be putting in place the operations required to start lending under the scheme and will confirm shortly the dates from which they will be ready to start receiving Bounce Back Loan Scheme applications from smaller businesses across the UK.

All lenders accredited under the Coronavirus Business Interruption Loan Scheme (CBILS) have been invited to become accredited to offer loans under the terms of the Bounce Back Loan Scheme. The Bounce Back Loan Scheme has previously accredited 11 lenders. These are Bank of Scotland, Barclays, Clydesdale Bank & Yorkshire Bank, Danske Bank, HSBC, Lloyds Bank, NatWest, Santander, TSB, RBS and Ulster Bank.

The British Business Bank says it is working at pace to accredit those lenders who want to provide lending under the scheme to further extend its reach and provide more choice for smaller businesses.

“There has been incredible demand from smaller businesses for Bounce Back Loans since the scheme launched this week,” said Keith Morgan, CEO of the British Business Bank. “Onboarding lenders with the capability and means to deliver the scheme rapidly means that more UK smaller businesses will be able to access the finance they need to get through the current pandemic.”

Far from plain sailing

While new lenders are being added, there are questions being asked of both lenders and the government as the range of emergency loan mechanisms rolled out across the UK hit some teething troubles. The UK Treasury Committee chair recently asked Barclays to explain customers’ struggle in accessing emergency Bounce Back Loans.

Rt Hon. Mel Stride MP, chair of the Treasury Committee, wrote to Matt Hammerstein, chief executive of Barclays as a result. Commenting on the correspondence, Stride said:

“Many businesses are facing a day to day struggle to survive. The welcome introduction of Bounce Back Loans has enabled cash to get to smaller sized businesses that need it fast. Issues that hamper this are very frustrating to customers and may in some cases threaten business survival.”

“I raised the problems that some people were having in accessing the Barclays online system with their CEO during our public committee hearing on Monday and was assured then that the system was able to cope well,” Stride continued. “As Barclays customers still seem to be facing issues and new ones may have arisen, I have asked Barclays to explain what is happening, and what it is doing to fix any issues that have arisen.”

The UK government itself has also been called on to up its game, particularly when it comes to supporting non-bank lenders. The Finance & Leasing Association (FLA) has renewed its call to the Government and the Bank of England to take urgent action to support the non-bank lending market. Figures released by the FLA show that its members provided just over £138bn of new business in the twelve months to March 2020. Of this total, £44bn was provided by non-bank lenders.

“The asset, consumer and motor finance markets have been hit hard by the measures taken to deal with the coronavirus crisis, with a 20% fall in new business in March alone,” said Stephen Haddrill, director general at the FLA. “FLA members have also faced almost 1.2 million Covid-19 related requests for forbearance, of which 75% have already been granted. The industry is committed to supporting their customers during these exceptional times. Urgent action is needed - in days, not weeks - to deliver financial support to the non-bank lending sector to ensure that we maintain a financial services sector that is diverse, innovative and competitive.”


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