Welcome changes to coronavirus business loans scheme
The chair of the Marches Local Enterprise Partnership today welcomed the Government’s revamp of the emergency coronavirus business loans scheme after revealing it had attracted strong criticism across the region.
Mandy Thorn said moves to make it easier for businesses to access the loans were urgently needed as companies across Herefordshire, Shropshire and Telford & Wrekin struggled to survive the crisis.
But Mrs Thorn urged to Government to keep the scheme under review amid concerns banks were charging huge sums in interest and imposing punitive penalty clauses on firms forced to turn to the scheme.
Her comments come after Chancellor Rishi Sunak today opened up the Coronavirus Business Interruption Loan Scheme to all small businesses – not just those who have been denied commercial loans – and also banned banks from asking for personal guarantees on loans below £250,000.
Mrs Thorn said: “I am delighted that the Chancellor has acted to meet some of the concerns about the loans scheme which we have been raising with the Government on behalf of our businesses,” she said.
“We know of cases where banks have been asking companies to pay up to 30 per cent interest on these loans and also imposing huge penalty clauses should a company want to repay them early.
“And we have heard story after story of local businesses being forced to jump through all sorts of hoops by the banks when they have applied to this scheme which seems to go against everything it was set up to do.
“I am disappointed that the Chancellor has not imposed a cap on interest rates in this revamp of the scheme, but really do welcome the measures to free up access to the money. I would urge him to keep the scheme under constant review and not hesitate to act if further changes are needed.
“Businesses across our region face a very real and immediate threat to their existence and it is a matter of the utmost urgency that banks start to release this cash without imposing punitive charges and restrictions.”
The LEP – the business-led organisation charged by the Government with delivering economic growth across the Marches – has been gathering feedback from businesses and lobbying the Government for changes to the scheme since it was announced last month.
The Treasury’s own figures showed that it had received more than 130,000 loan enquires from firms but fewer than 1,000 had been approved for small and medium sized firms.
The Chancellor has lifted the restriction which had previously meant loans for small businesses were only available to firms that had been turned down for a commercial loan from their bank. He has also banned lenders from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000.
However, the Treasury did not put in place restrictions on the interest rates that banks can charge for loans despite Bank of England rates being at an historic low.
Firms with a turnover of up to £500m will also be eligible for more help under the changes.
For the latest details of the coronavirus support available visit http://marchesgrowthhub.co.uk/coronavirus