Originally written by Timothy Adler on Small Business
Banks are warning that small businesses will never repay up to half of the Bounce Back Loans that have been taken out.
Moreover, when this happens, the Chancellor should prepare for the collapse of hundreds of thousands of small businesses.
Three senior bankers have warned that between 40 per cent and 50 per cent of the 608,000 borrowers who have taken out £18.5bn of Bounce Back Loans could eventually default on the debt.
Although the Government has said it will guarantee 100 per cent of the loans up to £50,000, it is still down to banks to pursue defaulters for the debt.
Executives say it would be logistically impossible to take hundreds and thousands of small, often family-run businesses to court, and that it would be a PR disaster for high street banks.
“Some arrangements will have to be made. A lot of them will be written off or converted into something else,” one bank chairman told the Financial Times. “In most cases the idea of the government taking equity in these companies is unrealistic — they are simply too small. So the question is what’s going to happen to all of these loans?”
RBS calls for bad loan
Tag Archive for Small-business Banking
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State could take equity in small businesses, suggests Lloyds chairman
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Lord Blackwell, chairman of Lloyds Banking Group, has suggested the government could end up owning equity in thousands of small businesses.
The Lloyds chairman thinks the government would be better off converting loans it is already guaranteeing into equity stakes in small businesses if loans go bad.
Banks and the government would need to work together to “think about how we transform some of that debt that they’ve accumulated into some other kind of security”, he said.
The Bounce Back Loans scheme, which launched on Monday, May 4, lent over £2bn to more than 69,000 small businesses within its first 24 hours.
The parallel Coronavirus Business Interruption Loan Scheme (CBILS) has lent £5.5bn to 33,812 businesses since its launch on March 23.
Lord Blackwell, 67, told an online seminar organised by City & Financial Global that debts could be converted into equity or an equity-type of security.
Viable businesses
Government and banks “do need to think about what will be required to recapitalise some of those businesses to ensure that they are viable going forward and otherwise viable businesses aren’t forced into insolvency or liquidation”, he said.
Devising a solution “needs working through urgently so that we can give businesses some
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Fintechs giving up on joining coronavirus emergency loan scheme
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Fintechs are giving up on ever being recruited to join the government’s emergency coronavirus bailout scheme for small businesses, despite being eager to do so.
The British Business Bank, which administers the Coronavirus Business Interruption Scheme (CBILS), has added four more lenders to the scheme – Allied Irish Bank, ThinCats, Paragon Bank and IGF – to join 48 existing accredited lenders.
However, just three of those which have joined the coronavirus loan scheme – Funding Circle, OakNorth and Starling Bank – are the kind of fintechs which have shaken up business lending.
British Business Bank says that 80 per cent of Britain’s small business have a relationship with one of the CBILS 52 accredited lenders, and that it is speeding up onboarding of new lenders to further extend the scheme’s reach.
>See also: What is the British Business Bank? – a Growth Business guide
But, according to the Telegraph, 100 other lenders are champing at the bit to join the BBB’s accreditation process and some are losing hope.
This is despite 60 per cent of small businesses saying they will run out of cash within 12 weeks, according to the Association of Accounting Practitioners.
Oliver Prill, chief executive of fintech
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Microbusiness £50,000 Bounce Back Loans – how they work
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
The government has launched its microbusiness Bounce Back Loans scheme with a higher than expected £50,000 limit and a 100 per cent guarantee.
Businesses will be able to borrow between £2,000 and £50,000 and access the cash within days
Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form
The microbusiness Bounce Back Loans scheme is capped at 25 per cent of turnover and promises a streamlined application process.
Treasury says that the new microbusiness loan scheme will open next Monday, May 4 and will deliver cash to successful applicants within 24 hours.
Rishi Sunak, the chancellor, said: “Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis.”
Mike Cherry, national chairman of the Federation of Small Businesses, said: “To date, the existing interruption loan scheme has not been working for the small firms that make-up 99% of our business community.
“The decision by the chancellor to listen to our recommendation for a 100 per cent guarantee on smaller loans, alongside the
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Most emergency coronavirus bank loan applications still being rejected
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
EXCLUSIVE: Most coronavirus emergency business loan applications are still being rejected, despite chancellor Rishi Sunak overhauling the scheme.
Fifty-three per cent of Coronavirus Business Interruption Loan Scheme (CBILS) loan applications have been rejected, according to a survey of Small Business readers – despite the Treasury loosening the scheme on April 3.
Previously, high-street banks were following government guidance that coronavirus emergency business loans should only be offered to small businesses which would not qualify for a commercial loan.
The paradox is that banks were being asked to lend to companies they would normally turn down – and still be on the hook for the 20 per cent of the CBIL the government has not guaranteed.
Banks have long been reluctant to lend to small businesses, with just 2 per cent of lending going to SMEs, as they do not have the security banks look for.
Small Business surveyed 1,823 small businesses, 53 per cent of which said their coronavirus loan application had been rejected since April 3, when the scheme was overhauled.
The SmallBusiness.co.uk survey chimes with business secretary Alok Sharma’s own admission on Sunday that only 4,200 loans worth £800m have been awarded, despite over 300,000 applications.
This is
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First two fintechs added to coronavirus emergency loan scheme
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
The first two fintech banks have been added to the government’s coronavirus emergency business interruption loan scheme in an effort to break the logjam.
Other fintechs, including Funding Circle, Iwoca and Market Finance, which together have provided loans worth billions of pounds to small businesses, are also hoping to get approval to join the emergency loan scheme next week.
Only 2,500 loans worth £450m, have been agreed so far through the Coronavirus Business Interruption Loan Scheme (CBILS) out of a small business population of 5.9m.
Bankers say they have been overwhelmed with applications through the CBILS, with an estimated 300,000 enquiries.
Plus they complain that their loan book must be scrutinised by the British Business Bank, which itself is overwhelmed by the volume of loan applications.
>See also: 12 of the best digital banking platforms for small business
Yesterday, former Treasury secretary Baroness Morgan called for the CBILS to be opened up to fintechs, which, she said were more agile and more nimble than traditional lenders.
OakNorth Bank and Starling Bank have been added to the dozens of existing accredited lenders, alongside Cynergy Bank and The Co-Operative Bank.
Meanwhile, Arkle Finance, Close Brothers and Secure Trust Bank have also become accredited CBILS
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How is your bank helping your small business through coronavirus?
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Although all the high street banks are offering loans through the Coronavirus Business Interruption Loans Scheme (CBILS), several banks have gone further and are offering additional support to small business sector to help it survive the coronavirus crisis.
Here is a round-up of what small business help each high street bank is offering to help your SME survive the coronavirus pandemic.
Additional coronavirus bank support for small business – what’s available?
Barclays
Helpline for all business banking customers impacted by the coronavirus outbreak. Call 0800 197 10862 between 8am and 8pm Monday to Friday (except bank holidays)
Free business banking and no fees or interest on overdrafts between March 13 and June 12 2020 for business banking customers with annual turnover up to £250,000. After June 12 2020, normal charges and fees will apply, which will be debited from business banking accounts from August 2020
Clydesdale Bank and Yorkshire Bank
Clydesdale Bank and Yorkshire Bank relationship managers can approve a three-month capital repayment holiday to business customers who have not previously been identified as being in or approaching financial difficulty, or other high-risk groups
Relationship managers can authorise to extend overdraft and loan facilities by up to six months without charge
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Sunak overhauls coronavirus small business loans
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Rishi Sunak will announce an overhaul of the government’s coronavirus small business loans scheme on Friday (April 3) in response to mounting anger.
The government will remove the requirement for small businesses to show that they have no other means of funding before accessing the Coronavirus Business Interruption Loan Scheme (CBILS).
Firms trying to use the coronavirus small business loans scheme say banks have been demanding personal guarantees and quoting double-digit interest rates, driving applicants towards standard business loans.
Small business owners told MailOnline that they are being offered interest rates for between seven and 30 per cent on CBILS emergency loans – despite current UK base rate being 0.1 per cent.
Higher interest rate
Denice Purdie of Kinross-based Kapital Residential told Small Business that Bank of Scotland was advising her to apply for a conventional bank loan at a much higher interest rate. “This is not guaranteed and will take too long,” she said.
Sky News reports that Mr Sunak and his Treasury officials have been in talks with participating lenders, which include the high-street banks.
Although all the big banks have stated that they will not force small business borrowers using the CBILS to put up personal guarantees
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Nearly 1m businesses on brink of collapse, warn accountants
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
UPDATED: More than 800,000 businesses are within weeks of going bust because they can’t get the coronavirus business interruption loan.
Nearly one-fifth of small and medium-sized businesses are unlikely to get the cash they need to survive another month despite promises of unprecedented government support, according to the BBC Today programme.
Many firms have told the BBC that they can’t get the emergency loans or that the money will take weeks to come through.
With bank branches shut, thousands of struggling firms can’t get through by phone or when they do, they are being told they are not eligible.
>See also: How to get the government’s £10,000 cash grant for small businesses
Banks told the BBC they are following government rules on SME lending that firms only qualify the emergency loans if they cannot borrow in a normal commercial way or by taking out a loan against property.
Small business owners have contacted Small Business, saying they are being pushed towards standard commercial loans when they have rung up about the CBIL and that without a CBIL many businesses face collapse.
While grants are promised for the hardest-hit sectors such as retail, leisure and hospitality the group suffering from a
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Banks not cooperating with coronavirus loan, complain small businesses
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Small businesses complain that high-street banks are not entering into the spirit of the government emergency coronavirus loan, pushing them towards expensive products instead.
Entrepreneurs who have contacted Small Business show that banks are either wrongly understanding the Coronavirus Business Interruption Loan Scheme (CBILS) by asking for personal guarantees or are deliberately up-selling it, directing small businesses to take out regular business loans instead.
Alice Douglas, who runs St Curig’s Church bed and breakfast in Snowdonia, North Wales, said that she is faced with £20,000 worth of cancelled bookings because of coronavirus closure. She spent two days trying to get through to her bank, including seven hours of being put on hold, to ask for an overdraft extension. When Douglas – who has been with her bank for 40 years – explained that she needed financial support, her bank asked her if she had another income source over the next few months. When she said no, the bank said it was unable to help.
Douglas said: “I then asked [the bank] about the Coronavirus Business Interruption Loan but they said as I have no income at the moment they can’t do anything. Which defeats the whole