The taps are finally opening on the UK’s emergency loan scheme aimed at helping smaller companies survive the nationwide coronavirus shutdown, but many are warning the money is still not coming fast enough.
The government said on Wednesday that 2,500 small and medium-sized businesses had accessed just over £450m through the Coronavirus Business Interruption Loan Scheme (CBILS), representing a doubling in the past two days. But data show it has taken far longer to ramp up than equivalents in countries such as Switzerland.
Senior bankers said approvals were growing by a rate of 50 per cent every day by value as lenders scrambled to address criticism of the delivery of scheme.
Initial problems forced the government to reform it at the end of last week — less than a fortnight after Rishi Sunak had launched the unprecedented support package. The chancellor promised at the time of the launch to do “whatever it takes” to keep companies afloat as he sought to reassure company directors facing months of zero revenue.
Companies had difficulty accessing the scheme due to strict rules over eligibility, now relaxed, while underprepared high street banks struggled with delivery. But problems still remain.
The Financial Times has spoken to a large number of small company owners across the UK who complain about the time it takes to get answers from overworked call centres or local branches, sometimes a week or more after their initial application. Only about one in 10 applications has been processed and approved so far, according to a person familiar with the programme.
“We’re still hearing widespread complaints about customer service from those approaching their banks,” said Mike Cherry, chairman of the Federation of Small Business. “The feedback . . . is that the process is very demanding. Even those with business plans to hand have found them a trial.”
Some applicants said they were still being offered high-interest commercial loans rather than access to the government-backed scheme. Others said red tape has meant they have been rejected, with directors complaining they are struggling to provide evidence the business remains viable and can repay the loans given the uncertainty over the length of the lockdown and future earnings.
Nigel Saunders, director at D & N XPRESS, a haulier, said his request for a £37,800 loan was rejected on the grounds that his business was making a loss. “We’re spiralling at the moment. We’ll probably last until the end of the month, if that,” he said.
Tim Colman, managing director of Chevron Heritage, which makes parts for historic racing cars, said he is looking for a short-term CBIL loan to pay suppliers because he is unable to ship parts to customers in Europe.
“There is still no response and if they don’t release funds soon it will be too late,” Mr Colman said. “It’s now well over two weeks since I started this process.”
The Corporate Finance Network, which represents regional accountancy firms with about 10,000 SME clients, warned that about a fifth will most likely run out of cash in the next two weeks, even after the overhaul of CBILS.
Banks have struggled to meet the sudden demand as, in effect, all SME commercial lending is being routed through the scheme causing bottlenecks.
Royal Bank of Scotland said it had approved more than 1,700 applications mainly from existing customers, providing almost half of all the scheme’s approved loans. It said it was retraining 400 staff from other areas of its business to help deal with the influx of requests.
A Barclays spokesman said the bank was “processing very significant volumes of CBILS loans” and was “confident” it was doing everything it could to get money to businesses “as quickly as possible”.
Stephen Jones, head of UKFinance, the bank lobby group, said the hold-up had been caused by the strain of creating processes from scratch to deal with the sudden surge in applications. But he added that it was being solved, with automation for smaller loans being rolled out and greater resources for the scheme as a whole.
“We are trying our best to get the money out of the door,” he said, pointing to the complexities of the UK scheme compared schemes in other countries, such as Switzerland, where a simpler, faster programme has been running for the past fortnight.
The SFr40bn package of emergency loans — first announced on March 25 with 121 lenders participating — managed to disburse SFr15bn (£12.4bn) to 76,034 businesses in its first week, 28 times as much as the UK equivalent has in three weeks.
Swiss companies need only fill out a one-page form for an interest-free, government-guaranteed loan of as much as 10 per cent of their annual revenue, capped at SFr500,000. Some have reported the money is in their accounts within 30 minutes.
“Details of the Swiss scheme are literally being emailed round between bank CEOs and the government,” said one executive at a UK lender. “Why don’t we have something similar?”
Keith Morgan, head of the state-backed British Business Bank, which is administering the scheme, said it was working with lenders to process applications in batches, which should further speed up the process.
He added that the BBB was working hard to approve new banks for the scheme, which has about 40 lenders at present. “We want as much distribution as we can.”
UK bank bosses complain that they have been criticised for having to work with a system that was devised by the government to help viable companies, rather than prop up those already in trouble before the spread of coronavirus.
Referring to the Swiss scheme, one British banker said that “giving away government-guaranteed free money is the easy part” and warned that difficulties would arise when the loans came due for repayment.
Additional reporting by Nikou Asgari