Coronavirus: Fewer loans approved as firms rush to get lifeline

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Banks approved fewer Covid-19 loans in the week to Tuesday, leaving half of firms still awaiting emergency help.

The number of Coronavirus Business Interruption Loans (CBILs) agreed was 8,638, down from more than 9,000 the previous week.

Of 52,807 loans applied for, almost 28,000 have still to be approved.

“Staff are working incredibly hard to get money to those viable businesses that need it,” said UK Finance chief executive Stephen Jones.

More than £1.33bn of loans was approved in the week from 21 April to 28 April, down from £1.45bn in the previous seven days.

“A concerningly high number of firms continue to struggle to access this crucial lifeline,” said Suren Thiru, head of economics at the British Chambers of Commerce.

“More than £4bn has been delivered to over 25,000 businesses so far through the CBIL scheme,” Mr Jones said.

Scheme ‘should be simpler’

Banks have been criticised for delays in handing out loans but have blamed the heavy workload, the need to complete the necessary credit checks and a shortage of staff.

Trade body UK Finance said changes to the scheme announced by the chancellor this week would allow lenders to streamline their application processes and help more businesses to access the support they need.

Small firms will be able to access 100% taxpayer-backed loans of up to £50,000 within days of applying from next week.

Four weeks ago, when concerns were first raised that the CBILs were being processed too slowly and on too small a scale, the government and banks said the number of loans approved would climb.

Last week, when UK Finance announced the number of loans approved had doubled, that seemed possible.

Today’s figures end that hope.

While it’s tempting to blame banks for being too slow and risk-averse, they are doing what the regulators want: lending with careful attention to risk.

But right now, we need more lending and fewer time-consuming checks. The new Bounce-Back Loans are meant to address that, but there’s a more fundamental problem. Only a tiny fraction of businesses – about 1%- have applied for CBILs so far.

Most firms don’t want more debt – it puts their businesses, already sunk in Covid-related uncertainty, in double jeopardy. Not just ‘can it survive the shutdown?’ but also ‘can it repay the debt’?

The British Chambers of Commerce has called for more unconditional support to stop businesses going under. Another suggestion would be loans that you don’t have to pay back unless and until your revenues recover to pre-Covid levels, a hybrid of loan and grant.

“The Bounce Back loan scheme is a welcome step toward getting cash to the smallest firms more quickly,” said Mr Thiru.

“The UK government and financial institutions should simplify and standardise the CBILs application processes to unlock access for more businesses of all sizes.”

Virus hits Lloyds

Meanwhile, Lloyds Bank has revealed the coronavirus crisis has led to a massive 95% drop in profit.

Pre-tax profit for the first three months of the year were £74m, down from more than £1.6bn in the same three months of 2019.

“The coronavirus pandemic presents an unprecedented social and economic challenge, which is having a significant impact on people and businesses in the UK and around the world,” said boss Antonio Horta-Osorio.

The bank said it had lent about £410m to 3,752 small businesses as part of the CBIL scheme.

Lloyds is behind many of its rivals – HSBC has lent £765.2m, Barclays £835m and RBS £1.4bn.

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