Over 100,000 loan applications “bounce back”
Over 110,000 small businesses applied for low cost finance on UK first day bounce back loan program, highlighting the demand for credit to survive the coronavirus containment.
The banks providing the loans said they approved the vast majority of the requests and added that the money would arrive in bank accounts as early as Tuesday. Software systems have resisted despite receiving a request every two seconds by some banks.
The device is aimed at SMEs whose income has fallen because of the confinement. They were reluctant to use the government’s main support program, the coronavirus business interruption loan program (CBILS) because it is more expensive and the application process has been criticized as being slow and cumbersome.
the BBL diet offers loans between £ 2,000 and £ 50,000. They bear interest at only 2.5 percent and applicants only complete a short online application form. Businesses of any size can borrow up to 25 percent of their annual sales. The government will cover the interest and fees for the first year, after which the repayment begins. In the event of business failure, the taxpayer would foot the bill.
With banks reporting an average loan of around £ 30,000, the total distributed is expected to reach £ 3.3bn on the first day of the program. That’s almost as much as CBILS has distributed in its first five weeks – it has shelled out £ 4.1bn as of April 28, the latest figure available.
Jonathan Ratcliffe from Offices.co.uk, an online real estate company, asked Santander for a BBL on Monday and said the process was “very simple”.
“The only research I had to do was determine our turnover for the last fiscal year and enter about five pieces of information, such as company number, address, turnover, contact details banking and of course the amount we had to borrow. ”
Anne Boden, managing director of Starling Bank, told the Commons Treasury select committee on Monday that banking IT systems were “under strain” because of the number of applicants. “I think this program is going to be very, very popular. ”
She added that the program was more fluid than CBILS, which was based on the government’s existing business finance guarantee – a public program designed to increase lending to SMEs after the financial crisis. “This old program was meant to take one loan at a time and someone sits down in front of a laptop or a screen and enters all the details. . . if we have to do so many loans so quickly, it doesn’t work.
David Oldfield, general manager of commercial banking at Lloyds Banking Group, told committee members that banks could quickly approve BBLs for existing customers. “Unlike CBILS, the bank has no obligation to perform viability and affordability tests,” he said.
RBS, the largest SME lender by volume, said it received 30,000 inquiries on Monday. At 4 p.m., Santander said it had received almost 18,000 requests and made more than 200; At 5 p.m., Lloyds had 26,500 requests.
HSBC said it had received 19,800 requests from existing customers asking for £ 650million. It also received 14,700 loan applications from new clients. Of the 10 lenders using the program, only HSBC offers loans to non-customers, but they will first have to submit to money laundering and other checks.
Barclays said as of 2 p.m. on Monday it had approved 6,000 BBL worth £ 200million.
Mike Cherry, National President of the Federation of Small Businesses, said, “Day one comments on the rebound loan program have been mixed. Some submitted their short application forms with no issues, others were asked to wait for the forms to arrive, and some struggled to apply due to site failures. He urged more lenders to join the program urgently.
The Prudential Regulation Authority, the financial regulator, told banks they could adjust their credit risk ratings and exclude BBLs from leverage calculations, since the government offered a 100% guarantee.