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Hundreds of thousands of small businesses blocked from coronavirus loans as banks close doors to new customers

HUNDREDS of thousands of small businesses are being blocked from coronavirus loans as banks reject new customers, according to research.

Major banks including Lloyds, Santander and RBS are providing bounce back loans to existing customers, but refuse to open new business accounts.

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Hundreds of thousands of small businesses are being blocked from coronavirus loans as banks have closed the doors to new customers, according to research
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Hundreds of thousands of small businesses are being blocked from coronavirus loans as banks have closed the doors to new customers, according to researchCredit: Alamy

It has left firms that bank with smaller lenders unable to access funding, according to the All Party Parliamentary Group (APPG) on Fair Business Banking.

Research by the group, first reported by The Telegraph, suggests that hundreds of thousands of small firms may be denied access to the bounce back loans.

The bounce back loan scheme (BBLS) allows business owners to borrow between £2,000 and £50,000 to cover losses caused by the coronavirus crisis.

The loan is interest-free for the first 12 months, after which the rate is fixed at 2.5 per cent.

It's backed by the state, meaning the government will pay a lender back if a business goes bust.

However, the loans aren't funded by the government so banks must find the money themselves - and this can be more difficult for smaller lenders.

What help is there for businesses?

THERE'S a wide range of support available to companies during the coronavirus crisis.

  • The government has offered to furlough workers through its Coronavirus Jobs Retention Scheme, paying up to 80 per cent of wages up to £2,500 a month
  • While self-employed workers can get up to 80 per cent of profits paid by the government for the next three months - again up to £2,500 a month
  • The Bounce Back loan schemeoffers loans of up to £50,000, with the first year interest-free
  • Under the Coronavirus Business Interruption Loan Scheme (CBILS), SMEs can get loans and overdrafts of up to £5million for up to six years and the government guarantees up to 80 per of these loans
  • The Coronavirus Large Business Interruption Loan Scheme (CLBILS) offers support to companies with a group turnover of more than £45million
  • Small firms can get grants of up to £10,000 to help with ongoing business costs
  • VAT payments and self-assessment tax returns can be deferred for three months
  • SMEs that cannot afford their tax bills can ask HMRC for a “time to pay” arrangement so any debt collection is suspended
  • And they can get up to two weeks’ sick pay - almost £200 per employee for up to 250 staff members - refunded by the government.
  • A 12-month business rates holiday has been introduced for many businesses

For example, financial services firm Tide had around 70,000 business customers on its waiting list to apply for a loan when it announced it couldn't get the required funding.

When the announcement was made earlier this month, many customers had already been waiting for weeks.

Meanwhile, Metro Bank and Starling Bank are still accepting new business accounts.

But some people said they'd been waiting for weeks and have still not managed to sign up and apply for a loan.

Apart from HSCBC and Barclays, a majority of high street banks such as Lloyds Banking Group, which includes Bank of Scotland, Halifax and Lloyds Bank, as well as NatWest, RBS and Santander have all currently stopped accepting new business customers.

The banks said this is in order to maintain the quality of service to existing customers and to make sure they had access to the loans they needed.

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Kevin Hollinrake, a Conservative MP and co-chairman of the APPG on Fair Business Banking, said: "We’ve been encouraging small firms to shop around and use start-up lenders, and many have done so.

"But now they are being punished for it. It’s not right.

"Lots of them will be very good businesses that would have got through this period if they had had access to emergency loans but could now go bust.

"Smaller lenders, such as Tide, are signed up to offer bounce back loans but they are struggling to secure funding to support lending."

The bounce back scheme was set up for businesses in dire need of cash after complaints that the coronavirus business interruption loan scheme was too slow.

Lenders have so far handed out £48billion to more than a million businesses.

A Treasury spokesperson told The Sun it's encouraged banks to open to new customers as soon as it's possible for them to do so.

It added: "Our loan schemes are helping hundreds of thousands of firms get finance quickly at low, affordable rates, with over a million bounce back loans issued.

"This is alongside other support measures for business, including paying people’s wages, tax deferrals, business rates holidays and more than £10billion of grants.

“There are more than 100 lenders accredited to our loans schemes, and we will continue to work to support others to participate and to become accredited lenders.”

Santander told The Sun it'll review its position on not accepting new business customers over the coming weeks.

It added that it accepts bounce back applications from customers using their personal current account for business purposes, as long as they were opened before March 1.

A Lloyds Banking Group spokesperson said: “At this time we are focussing on our existing customers to ensure we are able to approve business loan applications, and provide funds, as quickly as possible.”

A spokesperson for NatWest and sister bank RBS told The Sun it's stopped accepting applications for new business current accounts from non-customers to provide better support to existing customers.

It added: "We are sorry for any inconvenience caused to those who wished to join us, and we hope to be able to welcome new customers again very soon."

While Tide said it had raised £50million before it had to stop lending.

Oliver Prill, its chief executive, told The Sun: "As the only non-bank accredited to the bounce back loan scheme, Tide is in a unique position in terms of having to raise funding from third parties to lend through the scheme.

"We worked hard to be accredited to the scheme as we know that around 1million SMEs don't bank with the big five and that the traditional banks were not allowing new customers to apply for bounce back loans.

"On accreditation we were in conversation with many financial institutions to access funding to lend through the scheme - we were able to raise and lend over £50million, a significant amount for a business of our size.

He added: "The only way for Tide to resume lending through BBLS is for the government to provide direct funding for the scheme."

Last month, small businesses were being urged to check they've got the right coronavirus loan for them or face paying twice as much in interest.

It came after banks were warned in April that it's their turn to repay the favour and bail out small businesses - more than a decade after they were saved during the financial crisis.

Keen to apply for a bounce back loan? Here's all you need to know.

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