Like most small business owners, John Pickering is worried about what a second lockdown will mean for his Norfolk quilting and embroidery shop.
His family business – Sew On and So Forth – was lucky enough to recover from a sharp fall in revenue at the start of the outbreak. But further strain – especially during the quiet winter months – will mean making sacrifices. At best, it will mean putting dreams of expansion aside. At worst, it will mean potentially losing his Hunstanton shopfront and letting go up to six staff including his son and nephew.
The 67-year-old was hoping to access £40,000 worth of emergency funding under the government’s bounce-back loan scheme (BBLS) to secure his firm’s financial future, but six months into the coronavirus outbreak, Pickering is still empty handed.
Banks have so far doled out £38bn to 1.3m firms under BBLS. But Pickering is among the 250,000 small and medium sized businesses believed to be locked out of the government’s bounce-back loan scheme (BBLS) simply because they do not bank with any of the 28 accredited lenders, according to estimates by the all-party parliamentary group (APPG) on fair business banking.
Without a financial lifeline, many of those firms – which may struggle to afford or qualify for commercial loans – will be forced to radically cut costs or go out of business.
Pickering tried to lodge an application with HSBC – one of the few banks that was accepting non-customers until last week – back in May. He later opened an account with online lender Tide, only to find out that the bank had run out of bounce-back loan money a week after the application was approved.
“If we do decide to shut down, the government has then got to support six people,” Pickering said. “And we’re on the north Norfolk coast – there’s very little chance of other employment. It’ll cost them a darn sight more to support those people than it is for a loan coming to me. It’s just nonsensical,” he said.
The Treasury has started to push the issue in recent weeks, telling banks in high level discussions that that the government expect applications to be opened up to non-customers. However, officials have stopped short of forcing banks to do so, as the matter is still considered a business decision.
Even though the bounce-back loan programme – which offers firms cheap funding worth up to £50,000 – is 100% government-backed, lenders still have to make reasonable efforts to chase down debts before the government agrees to use taxpayer cash to foot the bill.
Speaking in the House of Commons on Tuesday, City minister John Glen said: “Many of those [banks] that are still only open to existing customers are regularly reviewing that position.
“The government have always made clear to lenders that they should open to new customers as soon as it is operationally possible for them to do so. Lenders are fully aware of the current urgency, so we would expect them to respond appropriately to their customers’ needs.”
The matter has become more pressing for small firms after HSBC closed its doors to new customers last week, saying it needed time to work through a backlog of existing applications. HSBC, one of the UK’s biggest banks, was the only major lender processing applications from businesses outside of its customer base.
Critics say banks have been offered cheap funding from the Bank of England – under a term funding scheme for small businesses known as TFSME – for this exact reason: to help bolster lending to businesses in crisis.
Kevin Hollinrake, Conservative MP and co-chair of the APPG, said: “It’s unacceptable that up to 250,000 businesses locked out of bounce-back loans through no fault of their own as they’re with the ‘wrong bank’.
“Banks who can access cheap funding from the Bank of England have a moral duty to provide loans to these locked out businesses and we are calling on the Treasury to do everything they can to remind them of their obligations to UK SMEs and UK plc,” he added.
Industry groups like the Federation for Small Business (FSB) are concerned that businesses like Pickering’s are still struggling to access a loan more than six months since the UK first went into lockdown.
“With the end of November deadline for applications already fast-approaching, the Treasury should urgently intervene to ensure that those who find themselves in this position have a guaranteed route through which they can make an application that will be assessed swiftly.
“The trend is particularly troubling as a lot of firms will now be thinking about a bounce back for the first time following the PM’s warning of a further six months of disruption.”
Banking lobby group UK Finance said lenders were providing “an unprecedented level of support to businesses affected by the Covid-19 crisis”. They said government-backed loans were one of a number of options available for customers, who could also apply for traditional commercial loans, extended overdrafts and asset-based finance.
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