Just £1.1bn of Covid-19 bailout loans have been issued

Only one in five UK businesses who have formally applied for government-backed loans have been granted emergency funding during the Covid-19 lockdown, raising concerns that the programme is failing to get money out fast enough to support struggling firms.

Figures released by the banking lobby group UK Finance showed that British banks have nearly doubled the number of business loans for customers impacted by the Covid-19 lockdown in just one week, but critics say the government-backed scheme is still failing get money out fast enough to support struggling firms.

A total of 6,020 loans worth £1.1bn had been issued under the coronavirus business interruption loan scheme (CBILS) as of Tuesday. That is nearly twice the 3,309 issued last week, and marks a 150% rise in the total amount lent to small and medium-sized businesses – worth an additional £700m.

UK Finance said 21% of the 28,460 formal applications had so far been approved for the government-backed loans, which are interest-free for 12 months. However, more than 300,000 firms have reportedly made informal inquiries about seeking help from the £330bn scheme.

A survey released on Wednesday by the British Chambers of Commerce showed that just 2% of respondents had successfully accessed the CBILS programme this week. While that is double last weeks figure, some businesses said lenders were failing to respond to informal inquiries fast enough, if at all. UK Finance is not releasing data showing which banks are releasing the most loans under the scheme. More than 40 lenders are issuing CBILS loans.

Mike Cherry, the national chairman of the Federation of Small Businesses said: “This improvement marks a starting point, but while one in five formal CBILS applications are approved, the major banks claim their approval rates for standard commercial loans are many times higher than that. These loans are state-backed, so approvals should be higher still. Theres still a lot of work to do.”

The UK Finance chief executive, Stephen Jones, said banks were trying their best to keep up with demand: “Frontline staff in local branches and call centres are working incredibly hard to help firms access finance as quickly as possible amid unprecedented demand. Like all businesses they are working at reduced capacity as many staff are self-isolating or looking after family.”

The Treasury has had to change its criteria to get money out more quickly to businesses which may otherwise fail to survive the lockdown. It has banned personal guarantees that put business owners property at risk, and scrapped a controversial requirement for banks to offer loans at commercial interest rates – reportedly as high as 12% – to any eligible businesses before offering a CBILS application.

However, Labours shadow business secretary, Ed Miliband, said the CBILS programme should be expanded so the UK government guarantee covers the entire loan and therefore bolsters banks appetite to lend. Under the current terms, the government covers 80% of a CBILS loan.

“These figures show that the CBIL scheme is simply not working well enough. We need change now. The chancellor must move to a 100% guarantee of loans for smaller businesses as other countries have done. In this economic emergency, it is the right thing to do,” Miliband said. “In the coming days, businesses are facing critical decisions about their future.”

Cherry said there was also concern about the future of Britains loss-making startups, which were not eligible for CBILS but should not be allowed to fail.

“The question of support for early stage, loss making start-ups remains a pressing one,” he said. “The list of businesses that spent their early years in the red only to go on and be great successes is as long as your arm. They must not be abandoned.”