UK SMBs Say Lenders Refuse To Provide Relief Loans

Small and medium-sized businesses (SMBs) in the U.K. say their very survival is at stake because lenders have refused to provide inexpensive, state-backed loans amid a crush of demand.

The Financial Times reported that many financial institutions (FIs) have shut off access to so-called bounceback loans, which are designed to help SMBs survive the coronavirus pandemic. This is despite the fact that the British Chancellor of the Exchequer Rishi Sunak has extended the application deadline until Nov. 30.

Bounceback loans allow companies to borrow up to 50,000 pounds ($65,000) over nine years. The U.K. government said it expects SMBs will fail to pay between 35 and 60 percent of the 38 billion pounds ($49.3 billion) lent so far. So far, 1.2 million SMBs, nearly 25 percent, have received the relief loans.

But the FT reports that some lenders, including Tide and Conister, have stopped offering the relief loans, but remain on the list of the more than two dozen lenders advertised by the government. When businesses have tried use different banks, they have found that lenders will only take applications from current customers. Some, including TSB and Bank of Ireland, have a requirement that business customers must have been a client since before May, when the program was launched, to qualify.

Last week, HSBC said it will not open accounts for new business customers because it must first serve its existing customers. 

“I’ve been let down by Tide, not able to get a business account with Metro or Lloyds, and ignored by HSBC,” Sue, who runs a guest house in southern England and declined to give her last name, told the FT. “I can’t see my business getting a loan, even though I am entitled to one.”

In response to the criticism, HSBC said it must prioritize its existing customers, and noted that it has lent 12 billion pounds ($15.6 billion) to U.K. companies since the government first debuted its emergency loans, half of which were bounceback loans.

“As one of the only banks that remained open to applications from all U.K. businesses since the scheme’s launch, we received a huge level of demand,” the bank told the FT.

An anonymous businessman and philanthropist whose website helps SMBs apply for the loans told the newspaper: “This is going to kill a lot of businesses full stop. Businessmen and women who through no fault of their own have been unfairly denied the right to apply for this financial lifeline.”