Coronavirus business loans: Minister criticises ‘unacceptable’ banks for refusing financial help to small companies Reports suggest lenders are refusing to lend to companies with small turnover or promoting their own bank loans instead

Business Secretary Alok Sharma has said it is “unacceptable” for banks to refuse small businesses emergency coronavirus loans and said the financial sector should be doing “everything they can” to help companies.

The Government has launched a coronavirus loans scheme designed to offer companies interest free, government-backed loans to help shore up their businesses.

The Chancellor said he would underwrite 80 per cent of the risk of the loans as an incentive for banks to lend to firms in financial difficulty.

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But recent reports have emerged suggesting banks were refusing to lend to companies with small turnover or promoting their own bank loans as a first option, before offering the emergency loans.

‘Completely unacceptable’

And some lenders were demanding business owners give personal guarantees that could see their assets being seized.

Mr Sharma said the Chancellor, the Bank of England and the Financial Conduct Authority had jointly written to chief executives of UK banks to urge them to make sure the benefits of the Business Interruption Loan Scheme were “passed through to businesses and consumers”.

In a warning to banks, he said: “It would be completely unacceptable if any banks were unfairly refusing funds to good business in financial difficulty.”

He added: “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.”

‘We are listening’

Mr Sharma admitted there were problems with the scheme and said that, because it was new, it would “not be perfect from the outset”.

But he and the Chancellor are both “listening all the time” to concerns from businesses and is “looking are ways we can ensure they get the support they need”.

Chancellor Rishi Sunak would be announcing tweaks to the scheme in the coming days, he added.

Labour’s shadow Chancellor John McDonnell said the Business Secretary’s words were “not enough” and that “action” against the banks was needed.

Action needed

He said: “Words aren’t enough. We need action from the government against these recalcitrant banks, which we bailed out with hundreds of billions of pounds a decade ago.”

Alok Sharma said it would be "completely unacceptable" for banks to refuse financial support to firms which need it. Words aren’t enough. We need action from the government against these recalcitrant banks, which we bailed out with hundreds of billions of pounds a decade ago. — John McDonnell MP (@johnmcdonnellMP) April 1, 2020

Th announcement came after it emerged some lenders were refusing bank loans to companies with less than £100k of turnover or unless owners gave personal guarantees – which leave them personally liable for the debt.

A report by The Corporate Finance Network of accountants predicted on Wednesday that almost a fifth – 18 per cent – of the small businesses in the UK will not be able to survive the next month despite the taxpayer-backed loan scheme.

The Treasury insisted that “hundreds” of loans had already been issued through the scheme.

“Hundreds of these loans have gone out. Obviously different banks work in different ways, but cash has very much gone out of the door,” a spokesman said.