SMEs face collapse as they struggle to access govt loan scheme - report
By Abigail Townsend
Date: Wednesday 01 Apr 2020
(Sharecast News) - Up to 1m small businesses could be forced to close as they struggle to obtain the cash to survive lockdown, despite the package of measures announced by government, according to research released on Wednesday.
According to the BBC, quoting research carried out by a network of UK accountants, between 800,000 and 1m small and medium-sized enterprises (SMEs) could be left without enough cash to survive the next four weeks.
Advanced lockdown measures, announced by government on 23 March, have hit SMEs particularly hard, as demand dries up and firms have been forced to temporarily shut. Chancellor Rishi Sunak has announced a ?350bn support package for business, including rate holidays, grants and loans through the Coronavirus Business Interruption Loan Scheme. That is intended to help SMEs with cashflow problems by providing government-backed loans of up to ?5m that are interest free for the first 12 months.
To access the scheme, companies should apply through their existing lenders; government is providing a guarantee for up to 80% of the loan. However, firms must still meet traditional eligibility criteria, which means not all SMEs are able to access the scheme.
The BBC said that with most bank branches shut by the pandemic, thousands of firms were struggling to get through on the phone, and many were being told they are not eligible when they did.
One firm told the BBC that it had been offered interest rates as high as 30% by some lenders, and while lower rates of around 7% were available, it had been told it would have to wait as long as a month before the money came through.
Another business, a retailer, told the BBC its lender had turned it down after it made a "small loss" in 2019.
UK Finance, the banks' trade body, told the BBC: "Lenders are working hard to get financing to all businesses who need it as quickly as possible and are using the CBILS where appropriate, with some funding already been provided under the scheme.
"All lenders will take into account a business's individual circumstances when considering applications, and many business loans can be provided either unsecured or secured on business assets."
The BBC said the unnamed network of accountants, which serves more than 12,000 SMEs across Britain, found that 18% of their clients were unlikely to get access to the cash they will need to a survive a four-week lockdown.
"The findings echo similar reports from other business groups, estimating that up to a fifth of businesses could close if the lockdown lasts a month or more," the BBC reported.
On Tuesday, the Financial Times said the government was pressurising lenders to waive the need for small firms applying for loans of less than ?250,000 to provide personal guarantees. Although most banks have already done so, some of the 40 lenders operating the scheme are still insisting on a personal guarantee.
Sources at the Treasury told the FT that take up of loans was getting better "every day", although the FT also said borrowers were complaining of long delays to access the money.
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