Although major banks have already lent over £38 billion in loans to troubled businesses during the COVID-19 pandemic, a new report claims that a quarter-of-a-million small and medium-sized enterprises (SMEs) are struggling to gain access to Bounce Back Loans.
The all-party parliamentary group (APPG) has voiced its concerns about fair competition in business banking, given that the Bounce Back Loans are only available with 28 accredited lenders. Those small businesses that do not bank with an accredited lender are finding it increasingly difficult to get access to finance.
A recent report from City AM found that multiple businesses are having applications for Bounce Back Loans rejected – despite the entirety of the loans being fully guaranteed by the UK government. Although Chancellor Rishi Sunak extended the deadline for Bounce Back Loan applications to 30th November 2020 in his Winter Economy Plan speech, just five of the 28 accredited lenders for the scheme are currently welcoming new applications.
HSBC the Latest High-Street Name to Close Bounce Back Loan Applications
At the end of September, HSBC confirmed that it was one of those accredited lenders for Bounce Back Loans that was closing applications for new customers, citing the need to process all existing loan applications. This was a big deal for many struggling entrepreneurs as the bank was one of the few to accept applications from non-HSBC customers.
Many businesses are growing increasingly desperate for working capital to enable them to pivot in the current economic climate or, worse still, simply survive. Funding Options is a trusted portal that compares over 100 prospective lenders of business finance, which could yet be a vital lifeline for thousands of small business owners that have the door closed in their faces by high-street banks. Banking lobby group UK Finance also points to the alternative finance options available, with portals such as Funding Options connecting entrepreneurs to overdraft extensions and asset refinancing wherever possible.
APPG calls on HM Treasury to Intervene with Bounce Back Loan Deadline Approaching
Nevertheless, MP Kevin Hollinrake, co-chair of the APPG, believes that it is “unacceptable” that so many small firms are being “locked out” of the Bounce Back Loans scheme simply because they are “with the ‘wrong bank’”. Mr Hollinrake insisted that high-street banks have a “moral duty” to deliver the finance entrepreneurs need to survive in a scenario created through no fault of their own. The APPG is urging the HM Treasury “to do everything they can” to reinforce lenders’ “obligations to UK SMEs and UK plc”.
There is growing concern among lobby groups and organisations supporting the UK’s SME community. The Federation of Small Businesses (FSB) is also taking a stand to call on the Treasury to act fast and “intervene” to ensure all entrepreneurs that are currently ‘locked out’ of a Bounce Back Loan are given a “guaranteed route” to apply for the finance they need in good time. The FSB believes there could yet be an avalanche of more Bounce Back Loan applications after Prime Minister Boris Johnson warned that COVID-19 would cause at least another six months of socioeconomic disruption.