Thursday 9 April 2020 5:36 pm

Former business secretary Greg Clark leads calls for overhaul of coronavirus loan scheme

Former business secretary Greg Clark MP today branded the government’s coronavirus loan scheme for small and medium-sized businesses a “disappointment” and called for an overhaul of the programme.

“It hasn’t been taken up as widely as was touted when it was first launched. Since it was there to provide finance for businesses in substantial quantities it’s clearly been a bit of a disappointment,” Clark told City A.M..

The coronavirus loan scheme is available to businesses that lenders would consider viable, were it not for the current pandemic

Critics say this gives too much leeway for the banks administering the scheme and makes it difficult for applicants to know if they are eligible,

Kevin Hollinrake MP, chair of the All Party Parliamentary Group on Fair Business Banking, called for a clear checklist of criteria to be given to the banks by the Treasury and the British Business Bank to quickly establish the eligibility of applicants.

“It is understandable banks want to see information from applicants, but that should be as standardised as possible,” he said. “It needs to be quick and easy and we need this money out the door”

The coronavirus business interruption loan scheme (CBILS) was launched on 23 March as part of a £330bn package of loans and guarantees to help firms survive the coronavirus lockdown and protect jobs.

CBILS offers loans to small businesses with turnover of up to £45m. Companies can access the money through more than 40 approved lenders. And 80 per cent of the loans are guaranteed by the government.

Last Thursday chancellor Rishi Sunak tweaked the scheme after criticism from businesses that demands by banks for high rates of interest and personal guarantees had stifled lending.

A Treasury spokesperson said: “We’ve made changes to the loan scheme and we’re working with the banks to get this support out. We’re making good progress– with the latest statistics showing a fourfold increase in a week, with £453m worth of loans approved for 2,500 businesses.”

There are almost 6m small and medium-sized firms in the UK with estimated monthly payroll costs of £41bn, according to economic consultancy Fideres.

Clark – a former Treasury minister and business secretary between 2016 and 2019 – pointed to emergency small business support schemes in Germany and Switzerland as examples to follow.

“It’s notable that Switzerland and Germany have small business loan schemes which are much more straightforward, much more in the spirit of the [UK’s] self-employment package and worker support package, both of those have been successful because they were simple, bold and generous,” he said.

The APPG on Fair Business Banking yesterday called for the introduction of a standard form to establish gateway eligibility criteria to help speed up the process.

“At this point in time we need more direction for banks,” Hollinrake said.

“The issue is we have only got four working days to sort this out,” he added. “Businesses have supplier payments and payroll going out at the end of this week and if they don’t have the money in the bank to pay this stuff they will fail.”

Mike Cherry, national chair of the Federation of Small Businesses, said: “We’re hopeful that the adjustments to the CBILS that took effect on Monday start to have a meaningful impact on approval rates swiftly.

“If they don’t, then all options need to be on the table – including an upping of the 80 per cent underwriting point or a more specific, simplified set of terms for banks to use when assessing applications.

“The checks on those looking to borrow £30,000 or more are particularly stringent, and we need to look at how we make them less onerous.

“Switzerland has had a lot of success with the straightforward application process attached to its state-backed loan initiative – that could be a model to consider in future if this week’s changes fail to create any real traction.”

Stephen Jones, chief executive of UK Finance, said: “The reforms to the scheme confirmed last week by the chancellor will help more viable businesses access the support they need.

“We continue to work closely with the government and British Business Bank to ensure this scheme works in the best way possible to get money to viable businesses that require it.”

The British Business Bank said: “We are aware of the APPG’s recommendations and we will be responding in due course.”