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Senior bankers have been left in the dark by Chancellor Rishi Sunak’s last minute decision to offer loans of up to £ 50,000 to smaller UK businesses to help them weather the coronavirus crisis.
Mr Sunak on Monday afternoon unveiled plans for the government to fully guarantee so-called rebound loans of up to £ 50,000 to UK micro-businesses, which will be administered by commercial banks.
But senior bankers said they were not told the Chancellor had set the loan limit at £ 50,000 and worked over the weekend on the basis that the limit would be £ 25,000.
“The industry was a bit shocked. . . There is now an urgent filling that must continue, ”said one banker, who questioned whether the consumer credit law should be changed to allow lenders to provide loans to micro-businesses in the region. program framework.
Mr Sunak had come under pressure from Tory MPs to act quickly to provide a 100% state guarantee on loans to smaller UK businesses.
These businesses have struggled to obtain credit under Mr Sunak’s coronavirus business disruption loan program, which focuses on small and medium-sized businesses and requires strict viability checks that can cause long delays in applications and refusals.
Banks were not made aware of the £ 50,000 limit on rebound loans until shortly before Mr Sunak made a statement to MPs on Monday, according to government officials, who said that figure was still ” an option “in discussions with lenders on the program.
A spokesperson for the Treasury said: “The new loans will be available from Monday of next week and will reach corporate bank accounts within days.”
Mr Sunak is expected to spend the next few days “sorting out” the details of the program before it launches next week, but government officials said they wouldn’t necessarily have to change the consumer credit law.
An official added: “There are different options, but in all scenarios we make sure the money can come out the door.”
UK Finance, the professional banking body, said the rebound loan program was “a critical part of the support being provided to help businesses at this time.” The industry has worked closely with [the Treasury] on diet development.
Although some bankers have been blinded by Mr Sunak’s plans for the £ 50,000 loan limit under the scheme, industry executives have welcomed the proposals as they will help speed up loans to some of the UK companies that often lack the financial resources to survive the coronavirus crisis.
But banks are concerned that the £ 50,000 loan limit opens up a higher risk of fraud given the light approach to giving borrowers access to credit.
“All the problems have now doubled,” said an industry executive.
Some bank executives are also unsure of the guidelines for pursuing loan collection in the event of business default or non-payment, and whether they should do so before seeking government guarantees.
After Mr Sunak announced the rebound loan program, the Financial Conduct Authority said applicants could be approved under a “streamlined” due diligence process if the risks of money laundering and funding of terrorism were weak.
The regulator also said banks did not need to perform additional checks on applicants who had gone through a due diligence process in the past.
Businesses are still struggling to access loans under the Bigger Loan scheme, according to a British Chambers of Commerce survey, which found that some of the most cash-strapped businesses had not made any loans. asks because they were afraid to pay off the debt.
The BCC found that nearly half of the companies in a survey of its members did not intend to apply for CBILS or other government funding options. Of these, 30% said they might not be able to repay the loans given their precarious financial situation during the coronavirus crisis.
Loan programs are a key part of the government’s business bailout program, with four different ways for businesses of different sizes to access cheap or interest-free debt.
But senior banking executives are worried about the growing indebtedness of UK companies at a time when repayment capacity has dwindled given the epidemic’s impact on profits.
Alex Cosham, marketing director at Image Display & Graphics, a marketing agency that considered taking out a loan under the program, said: Slope. “
Most of those who applied were either waiting for a decision or failed, according to the survey. So far, the program has generated 20,000 loans worth £ 3.4 billion.
The survey was carried out ahead of the latest round of changes this week to the lending scheme, which has undergone a number of reforms since its inception to make it easier for businesses to access.