Interest rates reaching 30%, long delays when trying to contact a bank, and confusion about the application process are among the issues raised by Made in Group members when surveyed about the government's Business Interruption Loan Scheme (CBILS).
Via a survey sent out to the Made in Group, members have been lending their voice to a lobbying call from the manufacturing sector calling for clearer guidance in relation to the government Coronavirus Business Interruption Loan Scheme.
On Wednesday, Business Secretary Alok Sharma said that it would be "completely unacceptable" if any banks were unfairly refusing funds to good businesses in financial difficulty. Following on from this, Rishi Sunak, the Chancellor of the Exchequer, said that under changes to the Coronavirus Business Interruption Loan Scheme (CBILS):
- Applications will not be limited to businesses that have been refused a loan on commercial terms, extending the number who benefit. However, the Treasury has not capped the interest rates banks can charge.
- Banks will be banned from asking company owners to guarantee loans with their savings or property when borrowing up to £250,000
- Larger firms with a turnover of up to £500m will also be eligible for more help - with state-backed loans of up to £25m available to firms with revenues of between £45m-500m.
Figures also reveal that out of the government pledged £330bn of loans, only £145m, equal to 0.04%, has been lent so far. Yet, despite recent government announcements, the survey results - at the time of publishing - showed that:
- 23% of members had applied for the Governments COVID-19 Business Interruption Loan Scheme.
- Of those who had applied, 20% had their loan accepted, another 20% had their loans denied, and 60% were still in the process of having their loan assessed.
- When asked to rate the ease of the process, 60% of members polled said that the entire process had been either ‘Difficult’ or ‘Extremely Difficult’.
But how are our members responding to the CBILS loans? Speaking through the survey, several members put their thoughts about the current situation forward.
One member who responded to the survey said that the previous ‘guarantee’ requirements for the CIBIL were not fair. In their response, they said: “Banks are offering the standard products (at standard rates and T&Cs) first before the government-backed scheme. Likewise, asking for directors to personally back the loans is not very fair.”
That same member went on to state that the accessibility of the banks, something that was backed up by several other members, is another problem. That same member went on to say, “The backlog in processing them is also huge, for example, I was on hold for 4 hours to them.”
The idea of security was the hottest topic from our members, with another member going on to say that, “Asking for security at this moment in time, is in my opinion, ridiculous.”
However, the confusion around the loan and the lack of suitability of some members was something that many members voiced their concern about. Take this example: “We bought this turn around company in March 2018 and took the £2.3M turnover to £5.5M this 19/20 FY. We are trading well and almost at capacity. Unfortunately, Coronavirus is now causing a pause to that business and as such we have looked for help from our own bank through the CBILS.”
Now with financial figures that look good, and a company working at capacity, you would think they would be accepted for the loan. But as the member explained, this was not the case.
“The bank has turned down our application stating previous lending history, which was before our ownership of the company. This is crazy! How can the bank apply usual lending criteria during these unprecedented times?”
Again harking back to the view of several members who voiced their concerns at banks taking a strict view on loans during this unprecedented time.
That same member was keen to highlight that whilst the CBILS is of vital importance, the execution of the scheme leaves much to be desired. “The government scheme is a lifeline needed by many, but the banks are now stifling this.”
Speaking about the issue to BBC News earlier today, RBS chairman Sir Howard Davies admitted that the banks had been encountering these issues, putting blame on the fact, "I think we have to accept that the scale of this process and the speed with which it's been put in place has caused challenges for everybody.
But we've had good discussions with the Treasury and small firms, and I think the changes announced overnight will make quite a big difference."
Do the chancellor's changes go far enough? Will they make it easier for you to get a loan under the Coronavirus Business Interruption Loan Scheme? Share your experiences by emailing [email protected]