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UK Treasury asks banks to urgent talks on Covid emergency business loans UK Treasury extends emergency business loan scheme
(about 5 hours later)
HSBC, Barclays, NatWest and Lloyds to join meeting over bounce-back loan scheme Companies can request to ‘top-up’ their borrowing from next week
The Treasury has called an urgent meeting with Britain’s biggest banks to review plans for emergency business loans before England’s second lockdown. The Treasury is extending its emergency business loan scheme and will allow firms to “top up” their borrowing as part of new rules meant to keep British businesses afloat during England’s second lockdown.
The Guardian understands big lenders – including HSBC, Barclays, NatWest and Lloyds – were contacted on short notice on Monday morning, hours before Boris Johnson was due to address parliament about fresh Covid restrictions. UK firms will now have until the end of January to apply for emergency business loans, including bounce back loans (BBLS), coronavirus business interruption loans (CBILS) and the CLBILS scheme for larger firms. That is two months longer than the existing 30 November deadline. The extension also applies to the Future Fund, aimed at UK startups.
“We need to convene an urgent meeting at noon to discuss the favoured bounce-back loans,” the email read, according to a banking source. It was the first direct communication with banks regarding the loans programme since Saturday’s national lockdown announcement. “To help more businesses access additional support, deadlines for applications to our government-backed loan scheme and the Future Fund have been further extended until 31 January 2021,” the chancellor Rishi Sunak said on Twitter.
The bounce-back loan scheme, which is 100% government-backed, offers firms cheap funding worth up to £50,000. It has so far distributed £40.2bn to 1.3m UK businesses. Small businesses that already received funds through the 100% government-backed BBLS programme – which offers firms cheap loans worth up to £50,000 – will also be able to top up existing loans if they need additional cash.
One banking source said they were expecting the changes to involve extending the scheme by at least one month, beyond the 30 November deadline. The top-up is meant to help firms that borrowed less than the maximum sum available – up to 25% of their turnover to a limit of £50,000 – to avoid taking on extra debt. However, most firms made those calculations before the second lockdown in England was announced.
But one banking executive said businesses would benefit most from being able to apply for a second loan, or a top-up on existing loans given that firms calculated their borrowing needs before the second lockdown was announced. A government document outlining the changes said: “We understand that some businesses didn’t anticipate the disruption to their business from the pandemic would go on for this long; this will ensure that they are able to benefit from the loan scheme as intended.”
The scheme does not allow firms to raise their borrowing allowance if they failed to request the maximum sum available – up to £50,000 depending on their turnover. Firms will be able to request a top-up from next week but will only be able to do so once, according to the document. The bounce back loan scheme has so far distributed £40.2bn to 1.3m UK businesses.
“It has to be looked at,” the executive said. Sources also speculated that the upper loan limit of £50,000 could be reviewed. The changes were announced only hours after the Treasury convened an emergency meeting with Britain’s largest banks – including HSBC, Barclays, NatWest and Lloyds – in order to review the terms of the government-backed loan programme.
While the chancellor committed to crafting a new government-backed loans programme for 2021, the reality of a second lockdown could put more businesses under pressure without additional emergency funding. “We need to convene an urgent meeting at noon to discuss the favoured bounce back loans,” the email read, according to a banking source. It was the first direct communication with banks regarding the loans programme since Saturday’s national lockdown announcement.
Kevin Hollinrake, a Conservative MP and co-chair of the all-party parliamentary group (APPG) on fair business banking, said firms would be best served by a longer extension to existing schemes into the middle of 2021, rather than trying to come up with a new programme. While the chancellor had committed to crafting a new government-backed loans programme for 2021, the reality of a second lockdown put more businesses under pressure without additional emergency funding.
He also called for changes to rules that bar firms for asking for more cash under the government scheme. Kevin Hollinrake, a Conservative MP and co-chair of the all-party parliamentary group (APPG) on fair business banking, welcomed the Treasury’s announcement but said firms would benefit form a longer extension into the middle of 2021.
“Lots of businesses have either not taken loans thinking they could get through it, or they’ve taken a loan of a certain size thinking that would be enough and everything’s changing,” he said. He said the top-ups should also apply to the larger CBILS scheme, which allows firms to borrow up to £5m and comes with an 80% government guarantee.
“I would very much like to see both a longer scheme extended, but also some changes of rules.” Hollinrake said the Treasury had also failed to address the fact that non-bank lenders are blocked from accessing cheap funding from the Bank of England. It means they cannot afford to offer bounce back loans – which come with a flat 2.5% interest rate – to their customers. Meanwhile, most lenders that do have access to cheap Bank of England funds are not processing applications from non-customers.
He also said banks should start offering loans to businesses outside their customers base. The APPG estimates that about 250,000 businesses are in effect blocked from emergency funding because they do not bank with one of the accredited lenders, or their lenders are blocked from accessing cheap funding from the Bank of England to support the loans. “That’s still a work in progress and an issue that needs to be resolved as soon as possible,” Hollinrake said.
The Treasury declined to comment. The APPG estimates that about 250,000 businesses are in effect blocked from emergency loans as a result.