More than 69,000 so-called coronavirus bounce back loans were approved on the first day of them being made available via banks.
The approvals equate to over £2bn in loans during the first 24 hours of the bounce back scheme’s launch on Monday, chancellor Rishi Sunak said today.
The seven largest UK banks including HSBC, Barclays, Lloyds, RBS, Santander and Virgin Money received more than 130,000 applications for bounce back loans on Monday.
Under the small business loan scheme, SMEs can apply for loans of up to £50,000 and expect to get the cash within as little as 24 hours.
The government has guaranteed 100 per cent of such loans. Sunak announced them a week ago after criticism banks have been slow to lend out larger sums to small businesses struggling amid coronavirus.
“Small businesses will be the driving force of our recovery from the pandemic, creating jobs and securing economic growth,” Sunak said today.
“These loans will help them bounce back from this crisis – getting money fast – so it’s great to see close to 70,000 businesses benefitting in just the first day.
“It’s vital this speedy progress continues in the days and weeks ahead.”
Lenders are now working to approve the remaining applications for bounce back loans as more pour in.
The scheme allows SMEs hit by coronavirus to apply for a loan worth 25 per cent of their turnover without providing proof they can pay back the sum.
It is designed to help struggling small businesses access cash more quickly to stay afloat during the coronavirus lockdown.
It comes after banks have been criticised for turning down larger coronavirus loan applications.
The government has set aside hundreds of billions of pounds to lend out to businesses with a turnover of up to £45m via UK banks.
But SMEs have slammed lenders for rejecting loan applications over historic profit issues, or where they have fallen to a small loss as a result of issues like late payments.
The bounce back loans are designed to allow small firms to access cash more quickly and easily.
Following the criticism, however, Sunak has overhauled the process for applying for a coronavirus loan. Banks had collectively loaned SMEs £4.1bn as of last Thursday.
And they have sought to simplify the application process by dropping a requirement for firms to predict future earnings.
Meanwhile, chancellor Rishi Sunak yesterday signalled he may extend the job retention scheme, which has so far cost the government £8bn in paying furloughed staff’s wages.
However, Sunak may cut the percentage of wages the Treasury pays furloughed staff. Currently that stands at 80 per cent of salaries, up to £2,500.
FSB: More access needed on bounce back loans
Federation of Small Businesses (FSB) National Chairman Mike Cherry said: “The bounce back loans scheme has come out of the blocks strong.” He pointed out the £2bn figure took weeks to achieve under the Coronavirus Business Interruption Loan Scheme (CBILS).
“From here though, it’s important that efforts to increase competition in the small business banking market are maintained,” Cherry added. And he raised concerns SMEs cannot access the bounce back loans scheme.
“Unfortunately, we are hearing reports that bounce back application forms are hard to access or enquiries are simply being acknowledged with a ‘we’ll call you’ message and nothing further,” he said.
“Many of the most vulnerable business owners – particularly sole traders – only have personal banks accounts. As a result, are being told that they can’t access a bounce back loan. It’s vital that they are helped to secure the finance on which many will depend to make it through this incredibly challenging time.
“All in all it’s a very promising start, but there’s still work to do.”
UK Finance: Figures show banks’ hard work
Stephen Jones, chief executive of banking industry body UK Finance, said the numbers were “testament to their [banks’] hard work”.
He added: “While businesses only need to fill in a simple form online to apply, it’s important to remember that this type of finance is debt, not a government or bank grant, and will need to be repaid by the borrower over the six-year term of the loan.
“All businesses should consider carefully their repayment obligations before completing a bounce back loan application. Under the terms of the scheme lenders are required to seek to recover any unpaid interest and principal on bounce back loans from borrowers.”