UPDATED: More than 800,000 businesses are within weeks of going bust because they can’t get the coronavirus business interruption loan.
Nearly one-fifth of small and medium-sized businesses are unlikely to get the cash they need to survive another month despite promises of unprecedented government support, according to the BBC Today programme.
Many firms have told the BBC that they can’t get the emergency loans or that the money will take weeks to come through.
With bank branches shut, thousands of struggling firms can’t get through by phone or when they do, they are being told they are not eligible.
Banks told the BBC they are following government rules on SME lending that firms only qualify the emergency loans if they cannot borrow in a normal commercial way or by taking out a loan against property.
Small business owners have contacted Small Business, saying they are being pushed towards standard commercial loans when they have rung up about the CBIL and that without a CBIL many businesses face collapse.
While grants are promised for the hardest-hit sectors such as retail, leisure and hospitality the group suffering from a cash-flow crisis is much wider.
The Corporate Finance Network represents accountants serving more than 12,000 small and medium-sized businesses nationwidw, who say that despite all the government support, 98 per cent of their clients either possibly or definitely won’t get the cash they need to survive for four months.
That suggests well over 800,000 businesses may be on the brink of collapse.
CFN surveyed 13,000 SMEs and predicted that 18 per cent of all SMEs will not be able to survive the next four months as a result of the Covid-19 lockdown.
One third of all small businesses face closure by June if the lockdown continues until then.
The CFN survey comes on top of another survey by productivity organisation Be the Business, which says two in five small businesses face temporary closure because of coronavirus.
However, business secretary Alok Sharma, speaking at this afternoon’s Downing Street coronavirus press conference warned banks it was “completely unacceptable” if banks are refusing funds to viable businesses in short-term financial difficulty.
The business secretary promised the chancellor would come forward with additional measures to help small firms trying to access support through the Coronavirus Business Interruption Loan Scheme (CBILS).
Mr Sharma said: “We know high street banks are working really hard to support the UK through this period, including through mortgage holidays and increased credit facilities.
“Loans for businesses are also being issued through the Covid business interruption loan scheme since it came into operation last week.
“The chancellor, together with the Bank of England and the Financial Conduct Authority, wrote to the chief executives of the UK banks to urge them to make sure that the benefits of the loan scheme are passed through to businesses and consumers.
“It would be completely unacceptable if any banks were unfairly refusing funds to good businesses in financial difficulty.
“Just as the taxpayer stepped in to help the banks back in 2008, we will work with the banks to do everything they can to repay that favour and support the businesses and people of the UK in their time of need.”
Just not good enough
Richard Pepler, CEO of Optimum Finance, said: “The government has overpromised the ease and availability of cash and the banks, left to their own devices without strict guidance, are implementing the loan scheme under tough and varying application criteria.
“The scheme, which has ended up wrapped in red tape with laborious application processes, requests for personal guarantees, and the inability to get cash into business bank accounts now, not in three months, is just not good enough.”
David Keene, CMO of business finance marketplace Funding Options, added: “The banking system needs to pull together to help our businesses survive. At present, the government’s Coronavirus Business Interruption Loan Scheme is only helping businesses that are low risk. However, there are a number of businesses out there that normally would be able to access finance, but currently can’t under more stringent lending criteria. The key to untying the Gordian knot is to bring more alternative finance providers, B2B marketplaces and other fintech organisations into the solution to complement the big high street banks.”