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Exclusive: MPs call for clarity on Bounce Back Loan replacement as lenders shut door on SMEs

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An influential group of cross-party MPs has called for the government to replace the Bounce Back Loan Scheme (BBLS) as soon as possible
The EU banking regulator has extended loan repayment holidays for companies struggling during the pandemic.

An influential group of cross-party MPs has called for the government to replace the Bounce Back Loan Scheme (BBLS) as soon as possible after lenders shut the door on new applicants for the state-backed coronavirus funding. 

All but one of the 28 banks eligible to lend money under the scheme have closed to new customers, despite the chancellor extending the deadline for BBL applications to 30 November.

Kevin Hollinrake, leader of the all-party parliamentary group for fair business banking, told City PM the group wanted a replacement scheme to be “rolled out really quickly”.

Hollinrake said the BBLS “should not end” as scheduled next month, and should instead be immediately replaced by “a new iteration of the scheme… that takes us through to the middle of next year”. 

Labour shadow business secretary Ed Miliband said it was “deeply concerning” that businesses on the brink were “being squeezed out” of the scheme, and said that the government should ensure they could still access loans. 

“It’s vital that ministers act to unblock the system and ensure finance is available. If they do not, the risk is that we will see more businesses going bust, and further job losses which will undermine our economy, and weaken any recovery.”

City PM has revealed that some small businesses eligible for the funding have been left unable to apply for BBLs after lenders closed to new applicants early. Others saw their applications to open business accounts rejected without explanation.  

Research by the APPG on banking suggested that up to 250,000 small businesses could struggle to access BBLs, as they do not bank with accredited lenders. Many of the major lenders require firms to have business accounts with them in order to access the state-guaranteed funding.

BBLs are 100 per cent government-backed loans introduced to help keep small businesses afloat through the economic disruption caused by the Covid-19 pandemic.

As of the 18 October, more than 1.3m businesses have received a combined £40.2bn in loans through the scheme, according to the Treasury.  Businesses can apply for up to £50,000 in loans under the scheme and have 10 years to repay the funds.

Yorkshire Bank and sister lender Clydesdale yesterday closed to new BBL applications, leaving digital challenger Starling Bank the only accredited lender still accepting new customers. 

New customers cannot directly apply for a BBL with Starling, however, and must put themselves on a waiting list to be considered for the funding. 

Chancellor Rishi Sunak has said the Treasury is developing a replacement for the BBLS, but it is thought that the new scheme will not be introduced until the new year. 

Businesses ‘will go bust’ without new funding

Hollinrake told City PM that he was concerned about whether the replacement scheme “would really be all-encompassing”, and whether it would be introduced soon enough to help businesses struggling with the impact of local lockdown measures.

“Some [SMEs] will go bust off the back of this,” Hollinrake said. “Cash flow is going to be very tight and there’s no doubt we’re going to have a difficult winter. If we don’t make finance available, then businesses will go bust”.

Business leaders also called for more support for SMEs unable to access BBLs. “The whole point of the Treasury extension for the bounceback loans scheme was to ensure as many businesses as possible could access it during these difficult times, right up to the deadline,” said Richard Burge, chief executive of the London Chamber of Commerce and Industry.

“If banks aren’t allowing new applications a month out from that point then that’s simply not acceptable and the Government and regulator must urgently look at why this is happening,” Burge added. 

Mike Cherry, national chair of the Federation of Small Businesses, said: “With a month to go until the BBLS is set to close, it’s vital that all small firms who need access to finance can do so in a speedy fashion so as to ensure that jobs and businesses can be safeguarded for the future.

A spokesperson for the Treasury said: “We are working closely with banks to ensure that borrowers who need them can access loans under the scheme.”

“We have said we will do whatever we can to support businesses, and we keep all our support schemes under review,” they added.