Chancellor Rishi Sunak is set to overhaul his coronavirus business interruption loan scheme, after banks came under fire for failing to help struggling small firms.
The scheme was unveiled as an emergency measure to help small- and medium-sized enterprises (SMEs) during the pandemic. But businesses have been asked to supply personal guarantees or been directed to other types of loans when they applied to high street banks for the government-backed funding.
Sunak is reportedly expected to make an announcement tomorrow, demanding that banks give firms the financial support they need and make it easier for businesses to access the money, according to MailOnline.
Meanwhile, Sky News has reported that he will stop banks from assessing whether SMEs are first eligible for other types of loans.
The government is channelling funds through the British Business Bank (BBB), the state development lender. The BBB, in turn, will provide funds to accredited lenders.
As Peer2Peer Finance News reported this week, the restriction for peer-to-peer lenders to take part in the scheme has been removed, with JustUs and Assetz among the platforms applying for accreditation.
“This is really welcome news,” said Daniel Rajkumar, founder and managing director of P2P business lender Rebuildingsociety.
“Banks have essentially used it as a market opportunity to sell other high cost financial services.
“It’s good to see this prompt action from the chancellor to meet needs of small businesses in these challenging times.
“The scheme was designed in a hurry and some banks wanted evidence of business models being viable before the coronavirus kicked in, which wasn’t helpful.
“It feels like the government is trying to be more on the side of small businesses than big banks which is helpful and hopefully is the case.”
Rajkumar added that he had a call scheduled with the British Business Bank to discuss the best way they can help SMEs.
James Lawson, corporate finance director at accountancy and business advisory firm MHA MacIntyre Hudson, said although the scheme isn’t perfect, the government’s intention is good.
“Based on the initial announcements we’ve seen significant strides to improve the scheme and clarify areas where details are lacking and I firmly expect that to continue,” he said.