Financial experts have raised new questions around the government’s recently-announced extension to the emergency loan schemes.
Accountancy group MHA MacIntyre Hudson has pointed out that just 49 per cent of applications under the coronavirus business interruption loan scheme (CBILS) have been approved, suggesting that many small- and medium-sized enterprises (SMEs) are unable to access the funding they need to support their business through the pandemic.
While there is a 63 per cent approval rate across all four of the government’s emergency loan schemes – the coronavirus large business interruption loan scheme (CLBILS), CBILS, the bounce back loan scheme, and the future fund – this figure is skewed by the 82 per cent approval rate at the bounce back loan scheme.
“Of the four Covid-19 loan schemes, only the bounce back scheme is particularly effective at getting help to where it is needed,” said Gregory Taylor, head of financial solutions at MHA MacIntyre Hudson.
“For the other schemes lending practices are too restrictive, and even good companies with solid growth prospects can’t get a look in.
“One of the best moves government could make to increase approval rates would be to allow banks to make loans at four times a company’s EBITDA,” he added.
“This is the tolerance non-bank lenders employ, and would allow many more businesses to benefit. Banks are currently only making loans up to a value of 1.7 times EBITDA, so many businesses are missing out on the support they need.”
Taylor also pointed out confusion around the six-month freeze on loan repayments which was announced yesterday (24 September).
“Who gets to decide whether this is allowed, the lender or the British Business Bank?” he asked.
Taylor’s queries follow criticism that an extended term time would hurt those peer-to-peer lending platforms which are authorised to offer CBILS loans. While banks can access wholesale lending facilities via the Bank of England’s term lending scheme, alternative lenders are currently restricted to raising funds via institutional investors.
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