Just 2% of small businesses have received coronavirus loans – and thousands risk going bust
JUST two per cent of small businesses have received an emergency loan to stop them from going under during the coronavirus cash crisis, suggests a trade body.
A survey of 701 small to medium-size businesses by the British Chambers of Commerce (BCC) found that only a small number of applicants to the Chancellor's coronavirus business interruption loan scheme (CBILS) have actually been successful.
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The latest blow comes as the Treasury fears the economy faces its worst slump on record, shrinking by up to 35 per cent by June.
Unemployment could rocket to 3.4 million and the deficit may spiral to £218billion this year.
Chancellor Rishi Sunak announced the CBILS scheme three weeks ago to help small to medium-sized businesses (SME) by providing them with loans of up to £5million each to mitigate the temporary impact of the lockdown.
An SME needs to apply to their lender and pass eligibility checks before being given access to the cash.
But banks had been denying business owners access to the scheme when they were eligible for commercial loans at a higher rate.
Last week, thousands of small businesses warned that they'll run out of cash within three months if they can't access the loans.
Results from the BCC survey, carried out between April 8 and April 10, also suggest that around two-thirds of businesses have had to furlough staff.
This is where 80 per cent of wages is paid for by the government while employees are unable to work during the lockdown, or due to self-isolation or being in quarantine.
But the portal to register furloughed staff isn't due to launch until April 20, leaving bosses just days to sort out the grant money before this month's staff payday.
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BCC director general Dr Adam Marshall said: "Businesses on the front line need cash to start flowing from support schemes fast.
"With April's payday coming up, we are fast approaching a crunch point, and both the furlough scheme and CBILS facilities need to be accelerated.
"While we've seen a high number of firms furloughing staff in anticipation of the Job Retention Scheme coming online, it is still unclear whether they will start receiving funds before their payroll date, which could exacerbate the cash crisis many businesses are facing.
"It is essential that the Job Retention Scheme makes payments to businesses as soon as possible.
"Any delay could mean more livelihoods under threat, more business failures, and more hardship in our communities."
New figures from UK Finance revealed today suggest that 21 per cent of applications have been successful, with 6,020 loans being approved out of 28,461 enquiries.
What help is there for businesses?
- The government has offered to furlough workers through its Coronavirus Jobs Retention Scheme, paying up to 80 per cent of wages up to £2,500 a month
- While self-employed workers can get up to 80 per cent of profits paid by the government for the next three months - again up to £2,500 a month
- Under the Coronavirus Business Interruption Loan Scheme, SMEs can get loans and overdrafts of up to £5 million for up to six years and the government with guarantee up to 80 per of these loans
- Small firms can get grants of up to £10,000 to help with ongoing business costs
- It has also announced VAT payments and self-assessment tax returns are deferred for three months
- SMEs that cannot afford their tax bills can ask HMRC for a “time to pay” arrangement so any debt collection is suspended
- And they can get up to two weeks’ sick pay - almost £200 per employee up to 250 staff members - refunded by the government.
- A 12-month business rates holiday has been introduced for many businesses
The figures may differ from to the BCC data because not all of the loans are being issued by UK Finance members, so won't be included in its numbers.
Plus, the finance body includes loans issued up until yesterday (April 14).
So far, the banking and finance sector has lent over £1.1billion to SMEs through the scheme, according to data from UK Finance.
Total CBILS lending has grown by £700million - or 150 per cent - in the past week, since Mr Sunak banned banks from asking for personal guarantees on loans of under £250,000.
Over the bank holiday weekend, an extra 1,800 loans were approved worth over £300million.
A Treasury spokeswoman said that ";hundreds of thousands of firms across the country" are benefitting from the coronavirus measures.
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They added: "We're working closely with banks to ensure we get this support out to those who need it as soon as possible."
Mr Sunak added: "Getting finance to businesses is a key part of our plan to support jobs and the economy during this crisis - and we’re working with lenders to ensure support reaches those in need as soon as physically possible.
"Loan approvals have doubled in a week with more than 6,000 businesses benefiting from over £1.1 billion of loans - and it’s vital we continue this upward trajectory."