Business groups say banks are too slow in processing emergency loans during crisis

The British Chamber of Commerce have urged the Government to speed up the way finance is being processed through the banks for businesses trying to cope with the coronavirus crisis.

Hannah Essex of the Chamber said: ““Despite swift and unprecedented support from the government, many firms continue to face a cliff-edge scenario. Cashflow remains a particularly urgent concern for many businesses. The BCC’s Coronavirus Impact Tracker data suggests just over a third of firms have only three months cash in reserve or less.”

The Coronavirus Business Interruption Loan Scheme

The Coronavirus Business Interruption Loan Scheme (CBILS) has been widely criticised as has the furlough scheme with two thirds of Chamber members still awaiting promised funds as payday approaches. Despite the huge amount of funds made available to the banks to loan businesses the Chamber found only 2% had so far been successful with only 15% having managed to secure a grant for small businesses. The firms who said they were unsuccessful said they were told they did not meet the criteria while those who applied for a CBIL and were denied said they were told their business was not viable.

One in ten small firms are planning to close leaving millions out of work this summer as the effects of the crisis become clear. At the start of the crisis last month Rishi Sunak announced the Treasury scheme intended to help small businesses mitigate the impact of the lockdown with emergency loans. But this week UK Finance admitted only 28,460 firms have been allowed to formally apply despite 300,000 inquiries with £1.1bn paid out from the headline figure of £300bn package of loans, grants and other financial measures available.

German, France and Spain

On the Continent France has helped 150,000 firms with £19.2bn, while Spanish banks have issued £4.1bn of state-backed loans to 48,542 companies and Germany has overseen 9,368 loans to businesses totalling £4billion. The Berlin Government said all requests for £2.6m or less are approved instantly, while those up to £8.7m are fast-tracked in less than a week.

Federation of Small Businesses national chairman Mike Cherry said: “Many members tell us it’s difficult to get to the formal application stage and banks are still slow to respond.”

Ian Carrotte

Thousands of businesses have given the media examples of how they have been turned down either for a loan or a grant. The various stories led Ian Carrotte of ICSM Credit to carry out an experiment and apply for a CBILS himself as an academic exercise as the business doesn’t need one. Although the application with one bank was successful the bank requested his home as security. A second bank pushed him to a normal loan with very high interest rates."

“Banks are behaving in a cynical way,” he said, “because when a firm applies for one of these loans they push them towards a normal commercial loan with interest rates of nearly 20%.”

He said almost all firms have money owed by their customers and they need to use the down time to chase up overdue invoices. ICSM Credit he said has a system of free online legal letters which members are using to bring in cash.

“Our free legal letters are still highly effective,” he said, “they secure a success rate of 87% even during this crisis and for the few that don’t work our debt collection service is available. The legal route continues unaffected by the lock down so don’t sit and wait for July – act now.”

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