Anger at banks that ‘rip off struggling businesses’ during the shutdowns with 35% emergency loans
The Mail on Sunday reporters Helen Cahill and Harriet Dennys have highlighted the shocking level of greed shown by the banks in charging struggling firms with high interest loans.
They reported: “Banks will charge businesses up to 35% interest on Rishi Sunak's emergency Covid loans within weeks. Data seen by this newspaper shows lenders have used the Chancellor's flagship £19billion loan fund to saddle businesses with 'usurious' rates, which come into effect this spring. Banks have issued £35 million of loans at rates of more than 14.99 per cent – even 34.9 per cent in one case – to firms shuttered by the pandemic, Treasury documents show.”
Disgusting loan sharks
Ian Carrotte of ICSM Credit described the banks engaged in this activity as ‘disgusting loan sharks’ saying the Chancellor should step in to prevent such practices taking place.
The Mail on Sunday reported: “Businesses will face crippling repayments from March as the loans hit their one-year anniversary dates and the 12-month interest-free period comes to an end. Experts last night predicted that the economy will be devastated this spring as taxpayer support is withdrawn – and warned the pain would be worse than the crash in 2008. They said the only hope of avoiding major collapses was Sunak propping up companies for longer. As well as coronavirus loan repayments starting from March for hundreds of thousands of businesses, the furlough scheme paying 80 per cent of wages will be withdrawn at the end of April.
Richard Fleming – European head of restructuring at Alvarez & Marsal said: “The second half of 2021 is when the health crisis will turn into a financial crisis as the vaccine kicks in and Government support ebbs away.”
Pledging to pay
Rishi Sunak launched the scheme on March 23 last year for businesses hit by the lockdown, pledging to pay the interest for the first 12 months and pledged to cover 80 per cent of the loans that aren't repaid. However many of those loans will soon be up for repayment and since last March firms have been hit by three lockdowns.
Ian Carrotte noted that interest rate cap of 14.99 per cent had to be introduced in June over fears banks would rip off small firms.
He said: “If a bank got in before the cap they can still charge sky high interest rates. Like vultures they saw an opportunity because they knew the Government would guarantee most of the loan. I’ve seen rates of up to 30% - how is that OK when everyone is struggling?”
Siobhain McDonagh
‘Entirely unreasonable’
In Parliament Labour treasury spokeswoman Siobhain McDonagh said the loans were ‘entirely unreasonable’ saying they were akin to high interest credit cards rather than commercial rates. The Bank trade group UK Finance claimed most loans were under 15%.
About ICSM Credit
ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.
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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk