Firms are being denied lifeline loans by ‘cynical’ banks: Business owners applying for special coronavirus help are being offered more expensive standard loans instead
- Bosses said applications for coronavirus ‘business interruption loans’ rejected
- Instead they were told by Lloyds that they would have to risk homes and savings
- Companies were told their personal assets would be used as collateral by bank
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Desperate business owners applying to Lloyds for an emergency Government-backed lifeline were told they must risk their home and life savings to take out one of the bank’s own loans instead.
Furious bosses said their applications for the new coronavirus ‘business interruption loan’ scheme were rejected.
Rather than being offered the Government-backed loans, which are interest-free for the first year and free of initial charges, Britain’s biggest lender has been offering firms its own more expensive commercial loans instead.
Damning emails seen by the Daily Mail reveal how difficult Lloyds has made it for firms to obtain the help they desperately need from the government ‘business interruption loan’
To make matters worse, the companies were then told their personal assets including their main home will have to be used as collateral, allowing the bank to seize everything they own if they cannot pay back the money.
Damning emails seen by the Daily Mail reveal how difficult Lloyds has made it for firms to obtain the help they desperately need to keep going and continue paying their staff.
Among those rejected was the 63-year-old owner of a Devon-based coach company, who was told he could use the life savings he hopes to retire on in two years’ time as collateral to obtain a standard loan.
The owner of a family-run furniture-making firm was told he would be eligible for a £1.5 million Government-backed loan only if ‘all other available ways of supporting a business on normal commercial terms’ are ‘exhausted’.
Businesses are forced to close their doors, losing vital income. Boarded up pubs and shops on deserted Camden High Street on March 27, 2020 in Camden Town, London
He was then informed that Lloyds could secure a commercial loan charged against the main homes of his father and brother, who run the business with him. This would mean their homes could be seized if the firm went bust and they could not pay back the money.
Firms were also told that the ‘business interruption loan scheme’ is available only to company directors who have ‘no tangible security’, meaning personal assets they can use as collateral to secure a standard loan.
Business owners complained of being quoted interest rates as high as 22 per cent on a standard commercial loan.
Companies which have been thrown into financial turmoil after being ordered to shut down their business during the coronavirus crisis are also being instructed to provide a raft of financial information – including their earnings forecasts for the next three months. Responding to the criticism of Lloyds, a Treasury spokesman said: ‘The Chancellor has made it clear that banks should support small and medium-sized businesses during these difficult times.’
A picture shows people standing at the look out toward the financial towers and bank offices of Canary Wharf from Greenwich Park in London on March 26, 2020
In a humiliating retreat, Lloyds last night told the Daily Mail it would stop demanding personal guarantees on all new loans while the business interruption scheme was running. This also applies to its own loans.
But it said the rules of the new scheme dictate that lenders cannot provide these loans if the firm would be eligible to borrow on ‘normal commercial terms’.
Tory MP Kevin Hollinrake accused banks of not acting ‘within the spirit of the rules’ and described their behaviour as ‘cynical’. He also warned that many firms will go bust if they are forced to wait weeks for commercial loans to come through.
Mr Hollinrake said other major high street banks, including Barclays, HSBC and NatWest, were behaving in a similar fashion.
He said: ‘This is totally outside the spirit of the scheme and not what was intended. We need to make sure that banks are playing fair.’
Lloyds, Barclays and HSBC were all forced to drop demands for personal guarantees on ‘business interruption loans’ worth less than £250,000 last week following a backlash.
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