Bounce back loans: £3bn lent on day one

More than 110,000 SMEs applied for low-cost finance on the first day of the UK’s “bounce back” loan scheme, according to early estimates.

Unofficial estimates suggest more than £3bn was lent on the first day alone. On Tuesday, Lloyds said it had lent over £1bn to more than 32,000 businesses. It had processed 17,000 applications by lunchtime alone with, HSBC reporting 12,800.

Participating banks said they had approved the most applications and added that the money should have already been in bank accounts by now. Applications were coming in every two seconds.

The scheme is aimed at SMEs whose income has fallen because of the lockdown looking for a simpler, streamlined method offered by the main government support programme, the coronavirus business interruption loan scheme (CBILS).

Non-bank lenders have called for  help with funding following fears that the scheme will damage competition in the small business loan market

The BBL scheme offers loans of between £2,000 and £50,000 with interest of only 2.5 per cent.

But it’s not been without its critics. Non-bank lenders have now called for government help with funding following fears that the scheme will damage competition in the small business loan market.

In a letter sent to Bank of England chief Andrew Bailey heads of the major alternative lenders said expressed concerns about “the cost of capital required” to take part, according to the FT.

The scheme was launched with an initial list of about ten lenders, including the UK’s biggest banks, but none of the fintech start-ups or alternative lenders that offer loans to SMEs have so far signed up.

Barclays said a small proportion of applicants could not be approved immediately because they needed to give more details, while NatWest apologised to some customers who experienced delays because of “massive demand”.

But almost all on the list only lend to existing customers, which has led to criticism from companies that do not bank with the bigger high street groups.

Bounce-back loans at a glance

Oliver Prill, chief executive of the business banking start-up, Tide, said it had already been contacted by thousands of customers concerned about getting access to bounce back loans.

Stephen Jones, Chief Executive of UK Finance, said: “While businesses only need to fill in a simple form online to apply, it’s important to remember that this type of finance is debt, not a government or bank grant, and will need to be repaid by the borrower over the six year term of the loan.

“All businesses should consider carefully their repayment obligations before completing a Bounce Back Loan application. Under the terms of the scheme lenders are required to seek to recover any unpaid interest and principal on Bounce Back Loans from borrowers.”

Wayne Johnson, CEO of the banking software company, Encompass Corporation, warned of the importance of having the correct measures in place. He said: “The news of this high application rate shows just how many small and medium businesses need the extra support at this difficult time.

“Even though this this new bounce back scheme offers real hope, with many business owners struggling to pay wages, utility bills and rent, all whilst receiving little or no revenue coming in, it is crucial that these big banks who offer the scheme follow the correct regulatory measures, and introduce relevant RegTech and automation technology to cope with this influx of demand.”

See also: nine new lenders approved for CBILS