Coronavirus: Rush of applications for Bounce Back Loans to help small firms

May 04, 2020

There has been a frenzied start to applications for Bounce Back Loans from small businesses desperate for cash to navigate the coronavirus crisis.

Banks have reported high volumes of interest in the scheme, which offers loans of between £2,000 to £50,000 that are 100% guaranteed by the government.

Between them just three lenders - Barclays, Lloyds and RBS - said they had received more than 62,000 applications by the end of the day.

That means the scheme has already surpassed the latest total of 53,000 under a previous - and widely-criticised scheme - that was launched in March.

Under the new loans programme, the money is interest and payment free for the first year - with rates of 2.5% per annum after the first 12 months.

Ministers say access should be easier for firms to navigate as the standardised form has only seven questions.

Banks handling the loans will not be required to run credit checks or assess the long-term viability of applicants.

HSBC had received 12,830 in the first three hours after the system opened.

Amanda Murphy, the lender's UK head of commercial banking, told Sky's Ian King Live: "At one point it was every second there was a new application coming in from a customer."

Lloyds had 2,000 applications in the first two hours, with an average loan size request of £35,000.

Barclays had reported 200 in the first minute, saying it had already approved each of them.

A Barclays spokesperson said: "Getting funds out to small businesses as quickly as possible is our number one priority right now and we're working as fast as we can to get funds into the hands of our customers."

The bank said it had approved 6,000 applications by 2pm.

Lloyds Banking Group said it had 26,500 applications by 5pm and RBS revealed 30,000 forms were submitted.

As the micro loans got into gear the government confirmed the Job Retention Scheme, known as the furlough scheme, was covering wages of up to £2,500 a month for 6.3 million workers at a cost of £8bn.

The Bounce Back Loans, of up to six years, were revealed by the Chancellor just a week ago amid frustration that money from the Coronavirus Business Interruption Loan Scheme (CBILS), designed for small and medium-sized firms, was slow to leave banks.

Lenders are liable for 20% of the risk under CBILS and business groups said evidence of lenders dragging their feet meant the taxpayer should underwrite 100% of the loans.

The speed of processing applications under the scheme has drawn unfavourable comparisons with similar initiatives in Germany and Switzerland.

Senior banking executives told the Commons Treasury select committee on Monday that the primary reason was that those countries had offered 100% state guarantees from the start.

"That therefore alleviated some of this pressure on banks to do affordability and the viability checks," said David Oldfield, chief executive of commercial banking at Lloyds.

Banking industry figures last Thursday revealed that £4.1bn had been dispersed to more than 25,000 firms under the CBILS scheme to date.

The Treasury said in a statement: "The Bounce Back Loan scheme is the latest step in a package of world-leading support measures launched by Chancellor Rishi Sunak - with £7.5bn already awarded in business grants, four million jobs supported through the job retention scheme and generous tax deferrals supporting hundreds of thousands of firms."

Mr Sunak added: "Small businesses will play a key role creating jobs and securing economic growth as we recover from the coronavirus pandemic.

"The Bounce Back loan scheme will make sure they get the finance they need - helping them bounce back and protect jobs."

Tej Parikh, chief economist at the Institute of Directors, responded: "The government has kept an open ear to businesses, and its continued efforts to adapt its response are welcome.

"The business interruption loan scheme has started to reach the front line, but small firms have still been having difficulty accessing finance.

"This additional measure should help more of those firms get the cash they need to see them through the weeks and months ahead."

The Bank of England said on Monday that measures of how exposed banks are to loans - which are monitored by regulators under rules put in place following the financial crisis - would be allowed to exclude borrowing under the new bounce-back scheme.

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