Yahoo Finance HSBC halts new bounce back loan applications due to huge demand
HSBC has pulled up the drawbridge on pandemic lending to new business customers as it struggles to meet demand for Government-backed emergency loans.
The troubled bank stopped accepting applications for new business bank accounts on Wednesday so it can fight a backlog of existing applications for bounce back loans for small firms.
Lenders have handed out about £38bn of bounce back loans, which are worth up to £50,000 each and are 100pc guaranteed by the exchequer, to 1.3m businesses since the scheme launched in May.
The move is a blow to small firms seeking loans as they steel themselves for six months of possible Covid restrictions that are expected to squeeze businesses’ finances.
It also raises further questions about the viability of the Bounce Back Loan Scheme.
Taxpayers could be left with a £23bn bill for bad debts under the bounce back scheme and two business interruption loan schemes for larger firms, according to accounts published by the Department for Business, Energy and Industrial Strategy (BEIS) this week.
Darren Jones, chairman of the BEIS select committee, wrote to business secretary Alok Sharma on Thursday asking what action had been taken to address risks that the lending schemes could lead to a surge in fraud and harm competition between lenders.
The British Business Bank, which administers the schemes, raised the concerns with Mr Sharma in May before the launch of the bounce back scheme and the Future Fund, which supports start ups.
The deadline for businesses to apply for bounce back loans is Nov 30 but lenders are required under the scheme to confirm any loan offer by Dec 31.
HSBC has approved 194,000 bounce back loans so far with a total value of nearly £5.9bn and said it is approving a new loan every 20 seconds.
It will continue to process applications from existing customers as well as those made by non-customers before 9am on Wednesday Sep 30. New small business customers will not be able to open accounts until Dec 14.
An HSBC UK spokesman said: “As one of the only banks that remained open to applications from all UK businesses since the scheme’s launch, we received a huge level of demand. With the scheme closing on Nov 30, we need to focus our resources on fulfilling existing applications.”
