The UK government has warned banks that they must provide businesses with access to coronavirus disruption loans after several banks were found to be blocking access.
When the UK government announced its measures to keep UK business afloat during the coronavirus pandemic, most of the promised financial relief came in the form of government loan guarantees made to commercial banks rather than direct support given to businesses. The government promises to provide guarantees up of 80% on coronavirus disruption loans made to businesses, but many business owners have found the banks less than forthcoming with the loans.
The idea behind giving the banks these guarantees was that they would then be able to give out coronavirus disruption loans to businesses that ordinarily wouldn't be able to get financial support. If a business that takes out one of the loans goes under and the loan isn't repaid, the government has promised to take on 80% of the risk of the loan themselves so the bank isn't as badly out of pocket.
The reality is that many banks are taking advantage of the coronavirus situation to make a profit, denying people access to the coronavirus disruption scheme and instead trying to sell their own financial products. Small business owners across the UK (including Northern Ireland) have been told that they don't qualify for coronavirus loans, and many are being offered the bank's own high-interest loans as an alternative. Some have even asked that company directors put their own homes up as collateral for a small business loans.
Business Secretary Alok Sharma issued a warning to banks this week following complaints from small businesses that were successful before the lockdown but are now facing financial ruin as a result of the lockdown. He said that it was "completely unacceptable" for banks to unfairly refuse funds to good businesses that now find themselves in financial difficulty.
Mr Sharma reminded banks that the government bailed them out during the global financial crisis in 2008, and suggested that now was the time for them to pay that favour back to the general public: "Just as the taxpayer stepped in to help the banks back in 2008, we will work with the banks to do everything they can to repay that favour and support the businesses and people of the United Kingdom in their time of need."
Source: BBC News
