The UK’s biggest banks have said they will ease their lending conditions to make it easier for small businesses to access cash through the coronavirus business loan schemes, after chancellor Rishi Sunak offered 100 per cent guarantees to the smallest businesses.
The coronavirus business interruption loan scheme (CBILS) has been criticised by many firms who have said banks have been too demanding.
Under CBILS, firms with turnover of up to £50m are allowed to apply to roughly 50 accredited lenders for loans of up to £5m. The government will back 80 per cent of the loans in most cases.
Sunak today announced a substantial change to the UK’s coronavirus lending, saying the smallest businesses can now receive loans of up to £50,000 that are fully backed by the government.
Following his announcement, the UK’s biggest banks said they would ease their requirements for lending.
Banking body UK Finance said on behalf of the lenders: “Lenders will only ask businesses for information and data they might reasonably be able to provide at speed.”
“We will not require the provision of forward-looking financial information or business plans from businesses applying for CBILS-backed lending, relying instead on our own information to assess credit and business viability.”
The banks are Barclays, Danske, HSBC, Lloyds, Natwest, Santander and Virgin Money.
The move came after pressure from the Treasury and Bank of England. BoE governor Andrew Bailey last week told banks they need to “put their backs into” lending.
Today, the Bank of England said: “We expect lenders to use their judgement on what information is required to make credit decisions.” It added that they should rely “on judgement in the absence of financial forecast information”.
It comes after Sunak simplified the process for the UK’s smallest firms with a new programme. The new “bounce back loans” will be 100 per cent guaranteed by the Treasury, meaning the government will take on all the default risk, and will be available from next Monday at 9am.
Small businesses will be now able to access loans worth 25 per cent of their turnover, up to £50,000, and the government will pay the interest for the first 12 months.
Sunak said banks will not need to perform any “forward looking tests of businesses viability” and that businesses would need to fill out just a “simple, quick, standard form”.