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Bounce Back Loan Restrictions Could Force Businesses To Go Bust

Posted 3 years ago

Bounce Back Loan Restrictions Could Force Businesses To Go Bust
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Campaigners and MPs have issued a stark warning that potentially tens of thousands of businesses could risk going bust due to delays when accessing the government’s Bounce Back Loan Scheme. 

The scheme has shown to be a popular choice for over a million businesses struggling to mitigate the economic impacts of coronavirus. However, the All Parliamentary Group for Fair Business Banking (APPG) is warning that loans are becoming increasingly difficult to access. 

The Group attributed this largely to the inability of a number of alternative lenders to access the Bank of England’s Term Funding Scheme, with many mainstream banks focusing on existing customers or in a number of cases deferring applications. 

What is the Term Funding Scheme? 

The Term Funding Scheme (TFSME) allows eligible banks and building societies to access four-year funding at rates very close to the Bank Rate. The scheme is designed to incentivise eligible participants to provide credit to businesses and households to bridge through the current period of economic disruptions caused by the outbreak of Covid-19.  

Cashflow finance providers, including relevant Fintechs, have the most urgent need for access to TFSME funding, so they can target inexpensive loans to the many good businesses that are so close to the edge today.

The National Association of Commercial Finance Brokers (NACFB) said it has contacted its members to assess the extent of the issue. 

“Although more than 1.1 million loans have been provided through the scheme, those businesses who have been encouraged to move to other fintech forms and ‘non-bank lenders’ cannot now access loans as their finance providers do not have access to the Bank of England’s Term Funding Scheme,” a spokesman from the NACFB said. 

Results from the survey carried out by the APPG reveal that all banks who offer Bounce Back Loans were either closed to new customers or had technical restrictions that made it difficult to even impossible to access loans or long waiting lists to do so. 

This comes as a recent survey found that only 45% of businesses eligible under the scheme have been able to successfully apply for a Bounce Back Loan. According to risk assessment experts at protecting.co.uk, the low numbers came as a result of overcomplicated application systems and busy phone lines.  

According to Sacha Bright, CEO of Nextfin: “It’s important the government does not ignore our fragile alternative finance sector. Fintech is the future large-scale tax payer, and is one of our most successful business sectors.

“To ignore it now would facilitate the infiltration of competing nations, including emerging economies, to infiltrate the sector. There are no borders on the internet, and it is important for the UK to maintain its position as one of world leaders in finance.”

Authors: Sacha Bright & Oliver Murphy


To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed. Nextfin is not liable for any damages arising from the use of or inability to use this site or any material contained in it, or from any action taken as a result of using the site. 

Tagged: sme coronavirus alternative finance news

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