The UK’s coronavirus business loan scheme has picked up after firms complained it was not working, with £1.1bn lent out to 6,020 small and medium-sized companies as of yesterday.
Banking body UK Finance today said total lending under the scheme has grown by £700m in the last week after criticism of the programme led the government to overhaul its rules. The average value of a loan through the scheme has grown to over £185,000.
The figures show a marked improvement since last Tuesday, when City A.M. revealed that only 2,022 small and medium-sized firms had accessed loans worth £292m.
Nonetheless, the UK’s scheme is well behind countries such as Switzerland. The Swiss programme, announced on 25 March, managed to hand out £12.4bn to more than 75,000 businesses in its first week.
The UK’s coronavirus business interruption loan scheme (CBILS) was launched on 23 March and offers loans to small and medium-sized firms. Companies can access the money through more than 40 approved lenders. And 80 per cent of the loans are guaranteed by the government.
The scheme was very slow to get going, however. Businesses complained that banks were carrying out strict tests before they lent. On 2 April, chancellor Rishi Sunak ditched many of the demands on businesses.
The government and lenders say the changes to the scheme have allowed the taps to open. Sunak today said: “Loan approvals have doubled in a week with more than 6,000 businesses benefiting from over £1.1 billion of loans – and it’s vital we continue this upward trajectory.”
UK Finance chief executive Stephen Jones said banks were also struggling amid the coronavirus outbreak.
“I am grateful that so many colleagues worked through the bank holiday so that over one billion pounds of support has now been delivered,” he said. “We expect this figure to continue to grow rapidly.”
Doubts about coronavirus business loans scheme remain
Yet the British Chambers of Commerce (BCC) yesterday said businesses were still struggling to access the scheme.
The BCC said in a survey published today that two per cent of firms have managed to access CBILS money. There have been over 300,000 enquiries made to the scheme.
Labour’s new shadow business secretary Ed Miliband has urged the government to guarantee 100 per cent of the loans.
In a letter seen by The Observer, Miliband said: “The risks of doing too little, too slowly to help businesses are much greater for the long-term health of the economy than the risks of doing too much, too quickly.”
Former Tory chancellors Sajid Javid and George Osborne have also said 100 per cent guarantees may be a good idea.
Sunak said yesterday that he will keep the details of the scheme “under review”. He said he will see if the government can “learn and improve” from countries such as Switzerland and Germany, where 100 per cent of loans are guaranteed by the government.
The chancellor raised concerns that banks might not perform adequate credit checks if backing was too generous.