October 21, 2021

Small firms suffer as banks make it harder to get a bounce-back loan

Quitting his IT job two years ago to start a beer tour business was a dream for Mike Hampshire.

But his hopes of breaking even in his second year of operation were crushed when the coronavirus crisis hit in spring.

Now the future of his Leeds-based business is in serious doubt as he’s been unable to get a bounce-back loan.

“Without a loan to tide me over I’m going to have to look for other work,” he said.

He’s not the only small business owner struggling to survive without being able to get a loan through the government scheme.

Mr Bounceback, an anonymous northern businessman behind a website which helps struggling small firms, said he has heard from lots of people with problems.

“Several banks are not accepting new customers, and the majority of them have chosen to only allow their existing customers to apply, or even worse some lenders appear to be handpicking customers and inviting them to apply,” he said.

Small businesses which bank with smaller lenders could be missing out
Small businesses which bank with smaller lenders could be missing out

“With many firms facing continued cashflow pressures, it is concerning that businesses who bank with non-accredited lenders remain largely unable to access these vital financial lifelines,” said Suren Thiru, head of economics at the British Chambers of Commerce.

But banking trade body UK Finance told the BBC that “the vast majority of applicants have been able to rapidly access the finance they need through the bounce-back loan scheme.”

It pointed out that more than 1.26 million smaller businesses have already received more than £38bn in finance so far.

“There are now 28 accredited lenders offering finance through the scheme, including some that are open to new customers,” it added.

Sudden halt

Mike Hampshire’s guided beer tours came to a sudden halt in March when pubs shut their doors.

“I’ve pretty much had no income since March, but had a bit of cash put by, so thought I’d try and ride it out,” he told the BBC.

“When pubs re-opened, the social-distancing rules made it impossible to run the tours and I’ve also had to cancel the annual beer festival I run in November.”

With his money running out he turned to government support and decided to apply for a bounce-back loan.

“I need about £5,000 to see me through to the spring when, hopefully, things will be better,” he said.

Mike Hampshire's guided beer tours came to a sudden halt in March
Mike Hampshire’s guided beer tours came to a sudden halt in March

But he banks with Monzo which isn’t one of the 28 lenders which signed up for the government scheme.

He tried to apply through HSBC, but the bank closed its doors to new customers last week, the day before he made his application.

Now he reckons he’ll have to take on a different job, just to help him get through the winter.

“There are so many unknowns. If I do find another job, it could well become a permanent thing which would mean the end of my business.”

HSBC said that it has made £12bn of bounce back loans and that it is trying to prioritise existing applications, which is why it closed applications to new customers on 30 September.

“We are no longer accepting new applications for Bounce Back Loans from companies that don’t have an existing HSBC business account and we will also stop taking on any new small business banking customers until 14 December,” the bank said.

Lloyds Banking Group, which includes Bank of Scotland and Halifax, says limiting bounce back loans to existing companies makes applications speedy as well as fraud and money laundering checks.

Closing date

Bounce-back loans allow small firms to borrow up to £50,000 over nine years at preferential rates, with the loans 100% guaranteed by the government.

The closing date for bounce-back loan applications is 30 November which means time is running out for firms who have yet to secure a loan.

The latest Treasury figures show lenders have approved 1,260,940 applications for the BBL scheme.

Of the 28 accredited lenders on the bounce-back loan site, only two appear to offer loans to non-customers: peer-to-peer site Funding Circle, and Capital on Tap.

Skipton Building Society accepts non-customers but only if they sign up for an invoice finance facility too, which requires credit checks.

“Government-backed loans are just one part of the industry’s wider support for businesses during these difficult times, with providers also offering commercial lending, capital repayment holidays, extended overdrafts and asset-based finance – meaning there is a range of help available for any firm that needs it,” said UK Finance.

The BCC’s Suren Thiru said: “Government, regulators and banks must work together to ensure that a greater number of firms can access this support during this challenging period.”

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