Banks have reportedly turned down struggling businesses for credit, even if they are eligible for a guaranteed Government loan, it has been revealed.
The news comes after Business Secretary Alok Sharma issued a “stark warning” to banks and building societies who are “unfairly refusing funds” to businesses affected by Covid-19.
Under the Government-backed initiative, known as the Coronavirus Business Interruption Loan Scheme (CBILS), smaller businesses who have been adversely affected by the coronavirus pandemic can apply for emergency finance.
According to the Treasury, the state will provide lenders with a guarantee of 80 per cent on each loan up to a maximum value of £5 million.
However, some business owners report being denied or asked to put up assets and savings as collateral before being approved for an emergency loan, which the Government has expressly asked banks not to do.
The Federation of Small Businesses (FSB) says some members have also been pushed towards “standard, expensive products”, and that banks were dismissive of small firms’ applications.
Commenting on the reports, FSB chairman Mike Cheery said: “We can’t have a situation where banks are approached by successful small firms and lenders offer up business as usual products. This is not business as usual”.
He added that small firms were promised “interest-free, fee-free, government-backed support from banks”.
The news comes after industry group The Corporate Finance Network found that 18 per cent of all small and medium-sized enterprises (SMEs) would not survive the next four weeks without access to finance.
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