UK banks approve £35bn in state-guaranteed loans amid strong demand | Banking
UK banks have approved nearly £35billion in government-backed loans for more than 830,000 businesses affected by the Covid-19 crisis, but lenders are still struggling to meet demand for emergency funding .
Figures released by the Treasury on Tuesday showed banks extended a further £3.6bn in loans to 85,000 businesses in the week to June 7, the 100% state guaranteed rebound loans ( BBLS) for the fastest growing small businesses. .
The Treasury also announced that the coronavirus job retention program now covered 8.9 million workers in the UK. He said claims for wage subsidies had reached £19.6billion. The so-called furlough scheme covers 80% of workers’ wages up to £2,500 a month.
BBLS, which are the most generous of the three loan schemes and offer cheap funds worth up to £50,000, account for the bulk of total loans made so far, at £23.8bn of £ granted to 782,246 companies.
While approximately 81% of BBLS fast-track applications have been approved so far, there are signs of a large backlog of applications. Most of the 16 approved lenders are restrict BBLS to existing customersleaving many small businesses on lockdown.
HSBC and digital start-up Starling Bank are among the only banks accepting external applicants for emergency cash loans, but they still prioritize their own account holders.
Starling was forced to block independent traders from opening new accounts for the second time last week and set up a long waiting list for its own customers amid a surge in demand for BBLS. There are approximately 10 million micro-entrepreneurs and sole traders in the UK.
It’s unclear how many companies are still waiting to open new accounts to access the BBLS, since the government figures only cover formal applications for each program.
Meanwhile, the Coronavirus Business Interruption Loan Scheme (CBILS), which involves a more convenient application process, has only managed to approve 51% of the 93,305 applications so far, with loans totaling now £9.6 billion.
The largest of the three main schemes, known as CLBILS, saw a much lower turnout. The programwho is also the least generousapproved 244 of 615 applications, with loans now totaling around £1.6bn.
Attention is now turning to repayment plans, with fears that many small businesses will struggle to pay off mounting debt over the next few months.
A Municipal working group predicted that small and medium-sized businesses will face unsustainable debt of £97-107bn by March 2021. A third of this total will come from government-backed loans.
The All Party Parliamentary Group on Fair Trade Banking (APPG) is calling on banks and financial regulators to introduce six-month payment and interest holidays for business loans and commercial mortgages outside the government scheme.
The APPG said most payment holidays did not cover interest payments and any forbearance was only available on request. “Lenders should step up their support and proactively offer full payment holidays, meaning interest as well as principal, to affected business customers,” the APPG said.
The city’s task force, led by EY and financial industry lobby group TheCityUK, is exploring a range of solutions to deal with growing piles of debt on standard and government-backed loans. Potential measures, which are currently being considered by groups such as the Treasury and the Bank of England, include turning debt into equity or profit tax, or introducing debt repayment holidays.