Chancellor, Rishi Sunak to Review Corona Virus Emergency Business loan scheme
The emergency loan scheme for Businesses suffering struggling with cashflow and basically fighting for their lives, is to be reviewed following hardly any approvals from banks.
The treasury confirmed it had received over 130,000 applications for the loan scheme, however at the time of writing fewer than 1000 approvals had been granted by participating banks.
Social media has been full of business owners criticising the banks for putting extensive and restrictive criteria in place, such as interest rates after the zero interest period being quoted up to 30%- with many quoting rates in the 15-20% bracket, and asking for extensive personal guarantees on the loans, putting applicants private homes at risk.
When banks can borrow currently at close to zero interest- especially if lending out savings funds they hold on account, which they are paying 0.01% interest on as many bank are currently doing for example, the question around the ethics of interest rates up in to the teens and beyond, when the country is in a state of nation crisis, and this times needs the banks to bail the people out, as we did them in 2008 should be firmly at the forefront of any discussion.
One of the most important changes to be dropped will be the need for companies to try and obtain a normal commercial loan elsewhere first.
The revamped scheme will place a ban on banks, preventing them from requesting personal guarantees on borrowing up to £250,000, but will not tie the banks hands on the rates they can charge after the interest free period.
The scheme will also be revamped to allow much bigger businesses access to the scheme.
Whilst the governments intention to help is clear, it is important to remember these are still loans, which need repaying, and businesses need to be in a financial position to do so. The question remains whether companies really want to take them out, or whether some may just chose to collapse.