Ian Carrotte tests the Government’s Coronavirus Business Interruption Loan Scheme – and finds it wanting

“It’s a joke,” said Ian Carrotte of ICSM Credit, “I applied for one just to see if I would be eligible. My business is profitable, I have savings and don’t need one but I thought I would test the system on behalf of ICSM Credit’s members.

“You have to go online to do it as of course unlike previous years it is almost impossible to go in and speak to someone at a branch. I completed the forms and requested a Coronavirus Business Interruption with Nat West bank of £20,000 for 12 months. Back came the answer: they said yes but wanted my house as security.”

Today (April 3, 20202) the Chancellor Rishi Sunak has stepped in following widespread criticism of the lone scheme saying he will speak to the banks next week about the abuse of the system. He has announced lenders would be banned from requesting personal guarantees – which mean borrowers often have to put their homes on the line – on loans under £250,000.

The chancellor said the loan scheme would be extended so that it covered all small companies affected by Covid-19 and not just those unable to get commercial funding. There would be a new scheme to bolster support for larger firms not currently eligible for loans, under which the government would provide a guarantee of 80% so that banks could make loans of up to £25m to firms with an annual turnover of between £45m and £500m.

The measures have been welcomed by all the official trade bodies from the British Chamber of Commerce to the CBI, but Ian Carrotte remains sceptical.

“The chancellor will talk to the bank chiefs,” he said, “but will they listen? There’s no legislation forcing them to agree. Since a firm has to be in profit and well established to apply they will simply offer them a normal commercial loan and demand security in the form of the owner’s home or other property. The Government guarantees the Coronavirus Business Interruption Loan of 80% for the banks but the borrower takes all the risk.”

He is not a loan voice in the controversy surrounding the scheme. The Small Business website said banks are either wrongly understanding the scheme by asking for personal guarantees or are deliberately up-selling it, directing small businesses to take out regular business loans instead. They quoted Alex Harris, a publican in London who was steered towards a conventional business loan with a 22 per cent business rate instead of the government’s coronavirus loan scheme.

One sector the chancellor has failed to address said Ian Carrotte are the entrepreneurs and start-up businesses who are in their first few months and have yet to make a profit.

“The scheme refers banks to businesses that are 'viable,'” he said, “but that covers up to half a million workers who are employed by new companies. A new business can take months or even years to make a profit and appear viable. There is an upward growth pattern to their trading but banks will only want to see profits. These firms are being turned down by the scheme and referred to the high interest rates of a conventional business loan where security is demanded and interest rates can be as high as 22%. What a joke.”

Ian Carrotte said for businesses looking to survive one of the best options was to join the ICSM Credit circle as it has up to date credit intelligence on the commercial sector. For less than the cost of a tank of diesel firms large and small can get information on late payers and companies (often household names) in trouble and to be denied credit.

ICSM Credit

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com

For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk