Banks have been told to ensure that no small businesses are “locked out” of government-backed coronavirus loans, after firms were left unable to access the loans despite being eligible for funding.
MPs said lenders accredited under the scheme should re-open applications for bounce back loans (BBLs), designed to help small companies weather the pandemic.
Barclays has been accused of “inventing” rules for the scheme after rejecting multiple BBL applications based on a regulation that does not appear to exist, City A.M. can reveal.
Mel Stride MP, chair of the influential Treasury Select Committee, said businesses unable to access funding should share their stories with Parliament.
“Accessing these loans may be a question of life or death for some of these businesses,” he said. “If these reports are true, then it would be very concerning that businesses may be facing lengthy delays or are unable to access the scheme at all.
“The Treasury Committee would be interested in receiving further evidence in this area.”
Ed Miliband, the shadow business secretary, called on the government to work with lenders to address issues with BBL.
But City A.M. has learned of multiple instances where Barclays told bosses that their applications had been declined because they had already applied to another lenders.
Under the rules of the scheme, which is overseen by the British Business Bank (BBB), owners cannot submit multiple applications for the same business at the same time. If owners have had an application declined by one lender, they can apply to another.
Small business owners told City A.M. that they had been prompted to submit multiple applications to the same bank without success.
HSBC came in for particular criticism, with SME bosses labelling their handling of the scheme a “complete shambles”.
Initially launched in May, BBLs are 100 per cent government-backed loans introduced to help keep small businesses afloat through the disruption caused by Covid-19.
As of 20 September, bounce back loans totalling just over £38bn had been approved for 1.3m small businesses, according to the latest figures from the Treasury.
Businesses can apply for up to £50,000 in funding under the scheme. Chancellor Rishi Sunak last week raised the repayment period on the loans to 10 years, and extended the application window until 30 November.
Some 28 lenders have received accreditation to issue bounce back loans, but of these just six are currently open to applications from new customers.
Kevin Hollinrake MP, leader of the all-party parliamentary group for fair business banking, told City A.M. that all accredited lenders should “do the right thing”.
He said banks must “open their doors to new customers” and “provide loans for businesses in need, who are currently locked out of the system”.
“It is incumbent upon the banks to deliver [BBLs] to all viable businesses,” he added.
Miliband echoed Hollinrake’s call for accredited lenders to re-open applications, saying the Government “must explain why this is happening and work with lenders to ensure they reopen applications and assess them fairly”.
“This inconsistency and incompetence is something struggling businesses cannot afford,” he added added.
Barclays ‘inventing’ own rules for bounce back loans
In an email responding to one business owner who appealed their BBL rejection, a Barclays employee said they “did not dispute” that the owner had not received a loan from another lender, but added: “the scheme rules are clear that only one application for a BBL is allowed per business”.
In another case, Jaipal, who runs an IT consultancy, applied for a BBL from Barclays after being rejected by another lender.
Barclays also rejected his application. After Jaipal, who asked for his last name not to be used, appealed the decision, the bank sent him a letter stating his application was rejected because of his previous unsuccessful application to another lender.
“As we know from our checks, you have also approached other lenders,” the letter said. “Although you’ve provided evidence that this hasn’t drawn down, it is against scheme rules to have more than one application”.
Jaipal, who has been trying to get a bounce back loan since May, told City A.M. of his frustrations.
“It can eat you up, and I’m usually mentally quite strong,” he said. “Legitimate people like myself have fallen foul of the system.”
Jaipal said he had taken on a separate full-time job on top of running his business “just to pay the bills”, and would be left unable to pay his businesses’ suppliers and contractors if he could not secure a loan.
Hollinrake said lenders should “know the rules of the scheme, and work to the letter of those rules… rather than inventing their own”.
A Barclays spokesperson said: “We’ve supported small businesses with 280,000 loans at a value of £8.7bn,” adding: “We use the cross-industry database as part of our checks before we are able to progress any application”.
Responding to Jaipal’s case, the spokesperson said: “We recognise that in [that case] we were not clear enough in our correspondence about the reason for declining his application and apologise for any misinterpretation.”
Liberal Democrat MP Sarah Olney said lenders “need to look at their lending criteria to make sure that they’re not excluding successful businesses from the scheme”.
A HM Treasury Spokesperson said: “Our schemes have supported more than one million businesses during the outbreak – with 28 lenders approving more than £38bn worth of loans.
“The Bounce Back Loan eligibility criteria clearly sets out that firms can apply for finance with multiple providers.”
A spokesperson for the BBB said: “Although each participating lender is responsible for their own system of handling loan applications, we are in regular contact with them regarding how their implementation of the scheme is working.”
HSBC under fire for ‘fobbing off’ customers
City A.M. also spoke to a number of business owners who have been unable to access funding through the scheme despite being eligible for support.
Gianfilippo Mattioli, who runs the Bottega Prelibato restaurant in Shoreditch, applied for a loan on the day the scheme opened but is still waiting to hear if he has been successful, nearly six months later.
He asked HSBC for the full £50,000, and was asked to make a second application, but subsequently has heard nothing from the lender
“It’s just a complete shambles. I don’t know what’s going on with HSBC, but you are always on the phone for at least an hour, and even then you don’t get through,” he said. “I don’t understand why this is happening if the government is backing the scheme.”
In contrast, Mattioli says that when he asked Natwest for a loan for another, smaller business he runs, his application was approved in just two days. However, he told City A.M. that he was “scared” to switch away from HSBC.
“I’m kind of stuck with them. I’ve been dealing with them for more than 10 years, but I don’t want anything to do with HSBC anymore. But I’m scared to move to another lender.”
Many business owners have also gone to extreme lengths to secure the funds. Peter Trotman, who runs financial advisory firm Vision Business Advisers, eventually got his money from HSBC, but only after submitting three applications and taking more drastic steps.
It was only after directly emailing HSBC chief executive Noel Quinn about the issue, Trotman said, that his loan was approved.
“I called them about 20 times, but it didn’t have any effect. The helpline HSBC set up was just there to fob you off — it had no connection at all with what was going on with applications.”
An HSBC UK spokesperson said “We’ve approved over 191,000 BBLs, totalling over £5.78bn, since the scheme launched and have been working hard to get these much-needed loans to our customers as quickly as possible.
“As one of the few banks accepting applications from businesses that aren’t currently our customers, we’ve been inundated with requests. As a result, the wait times are significantly longer than they were pre-Covid-19.”
They added that HSBC would look into the individual cases.
City A.M. would like to hear from small business owners who have struggled to access BBLs. Please get in touch with email@example.com or firstname.lastname@example.org if you have been affected.