Businesses call for urgent help as banks lend just £1bn under coronavirus loan scheme

High street banks urged to start lending quickly to prevent rapid collapse of thousands of UK small firms, as it emerges just 6,000 loans have so far been approved

Chancellor Rishi Sunak speaks during a remote Covid-19 press conference inside No 10 last week (AFP/Getty)

Business owners have demanded banks step up and start lending to save Britain’s economy after it emerged that just £1.1bn of loans had been agreed under a government-backed scheme intended to save tens of thousands of firms from collapse.

UK banks have collectively signed off on just 6,020 loans under the Coronavirus Business Interruption Loan Scheme (CBILS), with many small companies saying they are unable to access desperately needed funds and therefore face running out of cash imminently.

Chancellor Rishi Sunak unveiled the scheme more than three weeks ago, but was forced to strengthen it earlier this month when it emerged that high street banks were demanding personal guarantees from small business owners and charging interest rates of up to 30 per cent.

James Morris contacted his bank NatWest, which is part of Royal Bank of Scotland, more than a month ago after his events company began seeing a sharp drop-off in trade.

Trafalgar Marquees has not been able to access any financial support from NatWest — which remains majority-owned by the Treasury after a £45bn taxpayer bailout in 2008 — because the bank claims that the business is “not viable”.

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NatWest looked at Trafalgar’s last six months of trading, which Mr Morris says is highly unrepresentative because the winter months are significantly quieter for marquee hire.

“Business is normally picking up really nicely at this time of year but it’s just dropped off a cliff,” he said. “We’re doing a little bit of work for the NHS but it’s nowhere near our normal levels.

“I contacted NatWest on Friday 13 March to try to get ahead of the game when I realised income was disappearing.

“It took us two weeks to get a response. We couldn’t ring them. When we did, they said they would call back within four hours but instead we got an email back in 24 hours. It was not a great response.

“There are some sectors hit quicker and harder [by the the coronavirus crisis] than others, like events and hospitality. Our income has just disappeared really.

“I hoped there would be some degree of common sense in terms of trying to prioritise companies in most urgent need but that doesn’t seem to be the case.

“NatWest say that we’re not eligible for the CBILS scheme because we are not ‘viable’. How is any marquee hire business viable in these circumstances?

“The bank are looking back over the last three to six months. Naturally that’s our weakest time of year over the winter so of course we’re not going to be showing our best performance. They should be looking at a 12-month span.”

Many other small businesses have experienced similar difficulties. Banks have granted just 6,020 loans totalling £1.1bn under the CBILS scheme so far, figures from the industry’s lobbying group UK Finance show. That’s despite the fact that the government is backing 80 per cent of the value of the loans, reducing risk for banks.

Numbers of approvals have begun to rise, doubling over the past week – albeit from a low base. Lenders approved £300m of borrowing over the Easter bank holiday weekend, but business groups warn that the pace at which banks are acting is nowhere near quick enough to stop a large number of firms going out of business in a matter of weeks.

“There’s still a lot of work to do,” said Mike Cherry, chair of the Federation of Small Businesses.

“Many members tell us it’s difficult to get to the formal application stage — banks are still slow to respond to CBILS enquiries.

“Even if you do get your forms through, the process is very demanding for the uninitiated. We need simplification: banks should look at pre-filling forms based on data they already have on customers, and we shouldn’t have behind-the-scenes reporting requirements holding up approvals.”

Banks say that one in five applications are successful, but there are no figures for how many companies have enquired about the loans. Anecdotal evidence suggests that the vast majority have not filed a formal application as they believe their bank will not approve it.

“We’re lacking detail about the customer journey from start to finish,” said Mr Cherry. “How many have enquired? How many have dropped out at the application stage? What happens to those who are rejected? Are banks receptive to those who are not existing customers?”

Some business owners who have applied say they have been required to fill out dozens of pages of forms asking detailed questions.

Mr Sunak said when launching the scheme that it had been designed to quickly get money to businesses that need it. But Mr Morris said his experience has not matched the government’s depiction. He says NatWest has been “very, very cagey” about the scheme.

“They delete our emails and respond to their own questions.” The last one he received from his relationship manager at the bank stated: “I’m not in a position to comment further. This is our final response to you regarding CBILS.

“Trying to get all this together is a bit of a nightmare. There should be some assistance available from the bank. I’m not sure the banks have really grasped the scale of what they’re dealing with, they don’t understand the size of the problem.”

Without access to funding or an indication from the government about when lockdown restrictions might be eased, Mr Morris is not sure how long the company can carry on trading.

“It’s a very difficult position, we have to be a realistic.

“We’ve already furloughed some staff and we’re going to have to take further cost-cutting measures. But the business can’t survive on thin air.”