Wednesday 1 April 2020 5:39 pm

Coronavirus: Banks must 'repay the favour' to taxpayer after 2008 crash

Business secretary Alok Sharma has made a plea for banks to make more loans available for businesses during the coronavirus crisis.

Speaking at today’s daily press briefing, Sharma said banks were bailed out by the taxpayers in 2008 and that they must “repay the favour”.

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Small and medium businesses (SMEs) struggling with the fallout from the Covid-19 outbreak are able to access government-guaranteed loans of up to £5m through the coronavirus business interruption loan (CBIL) scheme.

The loans are interest-free for the first 12 months, however reports have emerged of some banks offering loans with double-digit interest rates after the first year.

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There have also been reports of many businesses being turned down for loans altogether.

Sharma pleaded with bank bosses to play their part in the crisis by offering loans in good faith.

“It would be completely unacceptable if any banks were refusing funds to good businesses in financial difficulty,” he said.

“Just as the taxpayer stepped into help the banks in 2008, we will work with the banks to do everything they can to repay that favour and support the businesses and people of the UK in their time of need.”

A report from the Corporate Finance Network, released today, said that one-fifth of all British SMEs will collapse in the next month, despite the government’s support packages.

The survey also found that one-third of SMEs would go bust if the lockdown lasted for three months.

Chairman of the Federation of Small Businesses Mike Cherry said a lot of its members were having problems accessing loans.

He said: “A lot of members are telling us that when they enquire at their banks about the interruption loan scheme they’re either being pushed towards standard, expensive products or lenders are very slow to respond.

Read more: Coronavirus: Businesses call on banks to do more as small firms face closure

“The Chancellor says there have been at least 30,000 enquiries about the scheme since it launched early last week. We now need to know, bank by bank, where these enquiries were made and how many of them are translating into meaningful support.”

Shadow chancellor John McDonnell said: “The government needs to get off the fence on the issue of banks hiking up overdraft interest rates and tell them straight to halt the hikes.”