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Government loans to small businesses double but experts say more needed

Chancellor of the Exchequer Rishi Sunak clapping outside the Foreign and Commonwealth Office in London to salute local heroes during Thursday's nationwide Clap for Carers initiative to recognise and support NHS workers and carers fighting the coronavirus pandemic.
Chancellor of the exchequer Rishi Sunak. (AP)

Banks have more than doubled the amount of government-backed coronavirus loans doled out to small businesses over the last week — but business groups say far more lending is still needed to stop firms across the country collapsing.

New figures from industry group UK Finance published on Thursday showed banks have now lent £2.8bn ($3.4bn) to small and medium-sized enterprises (SMEs) under the government’s coronavirus business interruption loan scheme (CBILS).

The figure is more than double the previously announced total of £1.1bn, which as reported last week. 9,000 loans have been extended over the last week, more than doubling the number of approved CBILs to 16,600.


“Frontline staff have been working tirelessly to get money to those viable businesses that need it as quickly as possible,” Stephen Jones, chief executive of UK Finance, said in a statement.

“This lending forms part of a broad package of support provided to SMEs including additional loans, capital repayment holidays, extended overdrafts and asset-based finance.”

Lloyds Bank became the first bank to publicly share its CBIL numbers, saying it had 2.382 loans worth £335m. It means Lloyds has written around 14% of all CBILs, or 11% by value.

Read more: UK economy suffers record shock and 'unprecedented' job losses

The CBIL scheme is the government’s flagship support policy for UK businesses, part of a £330bn-package meant to help the economy through the COVID-19 pandemic. The government agreed to stand behind 80% of the value of loans extended by banks to businesses.

Businesses groups cheered the rise in loans but said the scheme still needed to lend far more to have an impact on the economy.

“The increase in companies accessing CBILS is encouraging progress,” said the British Chamber of Commerce’s (BCC) head of economics Suren Thiru.However, the number of applications processed and approved will need to be increased significantly in what is a crunch week for firms urgently trying to access financial support.”

Banks have been criticised for the slow speed at which they had extended loans. As of last week, only around 6,000 businesses had been given cash despite over 300,000 expressions of interest. Businesses have also reported difficulty in applying for loans.

Bank of England governor Andrew Bailey said last Friday (17 April) that banks must “put their backs into it” and extend loans faster, warning businesses could go bust if not.

Tej Parikh, chief economist at the Institute of Directors, said on Thursday: “It is positive to see the scheme ramping up, but cash still needs to get to more businesses quickly. There are still swathes of businesses facing processing delays and restrictive viability criteria, and many are reluctant to engage with the system at all.”

Read more: Over 80% of UK firms unable to cope if lockdown lasts six months

Yahoo Finance UK reported this week that there are still concerning practices being reported in the administration of the scheme, with some small businesses being asked to default on existing loans in order to secure CBILs.

“The government must consider reforms to improve the scheme, from raising its backing of small loans to helping more non-bank lenders play their part,” Parikh said.

UK Finance’s Jones said: “We stand ready to support many more businesses in the weeks ahead, and will continue to work closely with the government to ensure businesses can access the support they need.”