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Coronavirus: Just £1bn of promised government loans reach small businesses

A man walks by boarded up bars as the UK continues its lockdown to help curb the spread of the coronavirus, in Glasgow, Scotland, Wednesday April 1, 2020. (Andrew Milligan/PA via AP)
A man walks by boarded up bars as the UK continues its lockdown to help curb the spread of the coronavirus, in Glasgow, Scotland, Wednesday April 1, 2020. (Andrew Milligan/PA via AP)

New figures show just over £1bn of promised government support for small businesses has so far reached companies, amid warnings of dire consequences unless banks speed up lending.

Banking industry group UK Finance said on Wednesday that loans worth £1.1bn ($1.3bn) had now been given to small and medium-sized businesses under the coronavirus business interruption loan scheme (CBILS), which was announced last month by chancellor Rishi Sunak.

“We expect this figure to continue to grow rapidly as lenders work hard to help get Britain through the current crisis,” Stephen Jones, chief executive of UK Finance, said.

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Some £700m-worth of loans have been granted in the last week alone and banks have now delivered just over 6,000 CBILs to customers.

Read more: Businesses plead for urgent support as two thirds furlough staff

While the figures show the programme is gathering momentum, business groups said it is still moving too slowly. UK Finance said over 20,000 formal applications are yet to be assessed and tens of thousands more small businesses are trying to lodge formal applications.

Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said the figures were an “improvement” but there was “still a lot of work to do.”

“Many members tell us it’s difficult to get to the formal application stage – banks are still slow to respond to CBILS enquiries,” Cherry said. “Even if you do get your forms through, the process is very demanding for the uninitiated.”

UK Finance’s figures come just hours after the British Chamber of Commerce (BCC) warned its members are facing a potentially devastating cash crunch unless government support reaches them soon.

Businesses were promised £330bn-worth of state-backed loans by the Treasury last month. The money was split between a corporate financing scheme for big businesses run by the Bank of England and the CBIL scheme for small and medium-sized businesses.

High street banks who administer the CBIL scheme have been overwhelmed by demand and are struggling to asses applications fast enough.

Read more: UK releases 'unprecedented' financial measures worth 15% of GDP

“Frontline staff in local branches and call centres are working incredibly hard to help firms access finance as quickly as possible amid unprecedented demand,” Jones said.

“Like all businesses they are working at reduced capacity, as many staff are self-isolating or looking after family.”

Many businesses will be forced to shut up shop or lay off staff unless government cash can reach them soon, business groups say.

Critics say the CBIL scheme should be extended to include alternative finance providers such as fintechs. Some are also pushing for the UK to overhaul the programme to make closer to Switzerland’s scheme, which sees the state guarantees 100% of loans to businesses rather than just 80% as the UK does.

READ MORE: Fintech tells government: 'We can help with coronavirus response'

“Is there an argument for looking at something like that? Of course there is,” Sunak said at the Downing Street press briefing on Tuesday evening. “We continually look at everything other countries are doing.”

A 100% guarantee would mean banks are taking no risk and theoretically speed up loan processing by cutting down on checks. However, Sunak said checks on business viability were important to prevent the taxpayer being saddled with higher losses in the future.

The Chancellor defended the scheme as it currently stands, saying there had been “enormous improvement” and banking staff were working around the clock to get loans approved.

UK Finance said 1,800 loans worth £300m were written over the Easter weekend.

Sunak said in a statement on Wednesday: “Getting finance to businesses is a key part of our plan to support jobs and the economy during this crisis - and we’re working with lenders to ensure support reaches those in need as soon as physically possible.”