Small firms inundate UK banks with coronavirus loan requests – The Guardian

Small businesses have rushed to apply for a new government-backed loan scheme, prompting one lender to warn that banks may struggle to cope with the demand.

Barclays confirmed it received 200 applications within minutes of the bounce-back loan scheme (BBLS) going live at 8.30am on Monday, while Lloyds said it received 2,000 applications over the first two hours. By 2.30pm, RBS had been sent 22,000 applications for the 100% government-backed loans.

The fast-track scheme offers loans worth up to £50,000 to Britain’s smallest businesses, which can apply through a simple online form. All banks offer the loans at an interest rate of 2.5% that kicks in after the first 12 month-period, which is interest and payment free.

Anne Boden, the chief executive of the digital lender Starling Bank, which has applied to be a BBLS lender, told MPs on the Treasury select committee there would be some concerns about how quickly banks could ramp their lending. The initial lending scheme for firms hit by the lockdown, the coronavirus business interruption loan scheme (CBILS), has been criticised for slow processing of applications.

Under CBILS, lenders have to manually send data to the British Business Bank – the state-backed institution managing the scheme – to process the government-back loans. Boden said this method was “not sustainable”. The BBB is now working on a new digital platform to speed up the process, but that will not be ready for another six to seven weeks.

“My greater concern at the moment is that the processes within all the banks won’t take the strain of what’s happening to process all these loans and bounce back that quickly. I think there’s going to be a scale problem here.”

Starling only started lending under the government-backed CBILS programme on Monday, despite having applied weeks ago to be included by the BBB.

Accredited lenders for the bounce back scheme told the committee that there had been a deluge of claims on Monday morning.

“We’ve seen applications at at rate of about 35 per minute,” Matt Hammerstein, the head of Barclays UK bank, told MPs. “So I think there will be extraordinary demand recognising the severity and the breadth of the impact of this [Covid-19] crisis across smaller businesses.”

Royal Bank of Scotland’s commercial banking chief, Paul Thwaite, said staff had worked “incredibly hard” to get the bounce back loan scheme up and running on Monday morning and had doubled call centre staff to more than 500 to deal with demand.

But MPs asked whether bank systems would be able to cope with the surge in demand, including those linked to the British Business Bank.

It came amid reports from that Barclays customers were struggling to access application on the bank’s website. Hammerstein denied that the site was failing to cope, and said Barclays tech team was actively increasing the number of applications the online site could handle at any one time.

UK lenders have been accused of failing to distribute funds fast enough through existing government schemes. The latest figures showed they approved less than 50% of the 52,807 applications for CBILS loans.

David Oldfield, the head of commercial banking at Lloyds Banking Group, told MPs his team also struggled to deal with the loan processing systems linked to the BBB. Those systems were originally built for another government programme known as the Enterprise Finance Guarantee, which was not built to handle such a surge in demand.

“I’ll be the first to say we had a slow start. We absolutely faced into those operational challenges … it’s quite a cumbersome and time consuming process,” Oldfield said.

The Treasury select committee chair, the Conservative MP Mel Stride, warned that he would be drawing attention to banks that were “slow off the mark”.

“When we’re at the end of this extraordinary, dreadful crisis, the banks will be right at the centre of that story in terms of how well the economy coped and how well we all got through this, so I don’t need to remind you of the absolutely critical role that you now play in this crisis,” he said.

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