The head of Britain’s banking lobby group has said the government’s coronavirus business loan scheme may need to change in order to increase lending to smaller businesses.
UK Finance chief executive Stephen Jones told the Treasury Select Committee today that the government may need to guarantee 100 per cent of loans for small businesses, instead of 80 per cent as they are now offering.
However, he also asked committee members for “a few more days of patience” as criticism begins to mount on banks and the government over their handling of the coronavirus business interruption loan scheme (CBILS).
UK Finance said today that the country’s banks had approved 6,020 business loans worth £1.1bn through CBILS, with just one-in-five applications gaining approval so far.
In comparison, Swiss banks managed to hand out £12.4bn to more than 75,000 businesses in the first week of its coronavirus loan scheme alone.
Jones said the Swiss banks were able to hand out loans at a much faster pace, because their government is guaranteeing 100 per cent of each loan.
This means the government will step in to pay back an entire loan if businesses are unable to do so.
Jones said this could be an option in the UK for smaller businesses, but that if the government begins to guarantee 100 per cent of loans for all businesses then it may lead to reckless lending.
City A.M. understands that there are no imminent plans at the Treasury to alter the loan scheme.
“It is possible that we need a combination of the two,” Jones said.
“That on the small end of the SME market perhaps loans below £25,000, where there is huge volume and probably the biggest backlog, that making the scheme simpler for that kind of borrower might be something to look at.
“But I would urge a few more days of patience as we see how the data pans out, how much more we’re able to deploy at pace before a re-engineering of the scheme is done.”
Calls for the government to underwrite 100 per cent of all loans under CBILS have grown louder in the past week.
Shadow business secretary Ed Miliband said today that chancellor Rishi Sunak “must move to a 100% guarantee of loans for smaller businesses”.
Sunak said at yesterday’s press briefing that he was considering all options when it came to the government’s economic response to the coronavirus crisis.