Advisory groups have welcomed news that the chancellor is set to extend the government’s support schemes for businesses but have clashed as to whether lending has been too restrictive.
The coronavirus business interruption loan scheme was due to close for applications on 30 September, its larger counterpart the coronavirus large business interruption loan scheme was set to finish on 20 October and the bounce back loan scheme (BBLS) ends on 4 November.
However, yesterday it emerged that the Treasury is reportedly set to extend the schemes.
Gregory Taylor, head of financial solutions at MHA MacIntyre Hudson, welcomed news of a potential extension, but said something needs to be done as lending under the schemes is still too restrictive.
“Pushing the application deadline back is good news for UK businesses of all sizes and definitely the right thing to do with the possibility of another national lockdown on the horizon, which would badly affect business,” he said.
“Hopefully, Rishi Sunak will take this opportunity to reform the schemes to improve the success rate of applicants.
“The overall approval rate is too low at 63 per cent, and this number is skewed by BBLS, which is running at an 82 per cent approval rate, the most successful of the schemes in deploying liquidity.”
Mark Turner, managing director, regulatory consulting at business advisory Duff & Phelps, said an extension is needed to support retail and hospitality sectors that would suffer from new restrictive measures.
And lenders need to strike a balance between helping firms and protecting taxpayer money, he added.
“If the government removes the measures too soon, it could undo the good that was done,” Turner said.
“Until the economy is in a position to get back on its feet there will be a demand for these products. The government guarantees are in place to save good businesses that cannot survive the sudden situation but they should be viable companies once we return to normal.
“The banks and P2P lenders accredited to the schemes have a duty to protect taxpayers’ funds and won’t want to be throwing money away where it’s inappropriate, so you never expect a 100 per cent loan approval rate even with the guarantees.
“It’s a difficult balance to strike between supporting businesses and protecting taxpayer money, which is made harder with all the uncertainty and unknowns.
“This crisis will come to an end and questions will be asked on how taxpayer money has been spent and why money wasn’t lent where perhaps there was a justification for it.”