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Small businesses in the UK are still struggling to access emergency finance from Barclays, a week after the launch of a government-backed “bounce back” loan scheme aimed at supporting firms hit by Covid-19.

Businesses were free to apply for bounce back loans from lenders accredited by the British Business Bank (BBB) from May 4. The scheme allows them to borrow up to 25% of their turnover, capped at £50,000, with a fixed 2.5% interest rate that is paid by the government in the first year. For lenders, the loans are subject to a 100% government guarantee, meaning they take on no credit risk themselves.

HM Treasury says that in the first 24 hours after the scheme launched, more than 130,000 applications were made to the UK’s seven largest lenders – of which just over half were approved on the same day.

However, in recent days GTR has spoken to a number of businesses that attempted to apply for bounce back loans from a range of UK lenders. Though many received funding quickly and efficiently, in the case of applications to Barclays, several say they have not yet been able to access any emergency finance.

One – a representative of a community interest company, speaking on condition of anonymity – says they were unable to access the application section of Barclays’ website for the first two days, due to high traffic. They then encountered error messages stating either that more information or a second signatory would be required.

They say access to emergency funding is “vital”. “We were a successful and profitable small business prior to this [Covid-19], and as a social enterprise we have always ploughed profits back in to work for micro charities for free – so this is especially frustrating,” they add.

Another business, a small vehicle rental company on the south coast of England, says it encountered the same error message for several days after the scheme’s launch. They were later told by Barclays that there was “an error in processing a bounce back loan for [their] business”, and told to contact the bank again.

As the company is typically reliant on visitors from overseas – currently impossible due to the Covid-19 pandemic – any emergency funding is “pretty urgent”. They ultimately chose to submit an application to Starling instead, after the challenger bank became an accredited lender on the scheme on May 11.

Several other Barclays customers also told GTR they had attempted to apply as soon as the scheme launched, but encountered the same error message. Applications to other banks – including Santander, Lloyds, RBS and TSB – were said to be straightforward, with companies receiving funds within a day.

A spokesperson for Barclays acknowledges the issue but says not all applications have been affected. The bank approved more than 20,000 loans in the first 24 hours of the scheme’s operation, they say, with a total value of £640mn. “That money is now in customers’ accounts,” a spokesperson tells GTR.

As of May 10, the bank says it has approved just under 70,000 bounce back loans with a total value of £2.1bn.

“We’re sorry that some customers are experiencing issues applying on our website,” the spokesperson adds.

“We require additional information from these customers in order to complete their application and have updated our systems to give much clearer information on what we require from them in order to progress their application.”

Barclays also says that for the vast majority of customers, the application process is straightforward and approved automatically. It adds that some human intervention is occasionally required to ensure the bank remains compliant with the scheme’s rules, for instance where information entered does not appear to match its records.

 

CBIL faulty

Difficulties in accessing bounce back loans echo concerns raised by industry groups about other emergency funding schemes put in place by the UK government.

GTR revealed last week that the British Exporters Association (BExA) had told a parliamentary inquiry into Covid-19 support measures that some firms were also encountering problems applying for the Coronavirus Business Interruption Loan (CBIL) scheme. It said access to schemes needs to be simplified and accelerated urgently.

The scheme lets companies with a turnover under £45mn apply for a loan that is 80% government-backed. Though overseen by the BBB, applications for these loans are also handled by individual lenders.

BExA’s claims have since been echoed by the British Chambers of Commerce‘s head of economics, Suren Thiru. “Although the steady improvement in the number of firms accessing CBILS is welcome, with many firms only having a few months’ cash in reserve the pace of delivery remains disappointingly slow,” he said in a statement issued on May 7.

Representatives from the BBB declined to comment when contacted, but GTR understands the difficulties often stem from the fact that lenders are still taking on credit risk for 20% of any loan issued under the scheme. That means time-consuming due diligence on every applicant would still be required.

UK Finance, an industry group representing the financial services sector, says bank staff “have worked tirelessly” to deliver emergency funding. As of May 7 – the most recent date for which data is available – more than £5.5bn had been made available through the CBIL scheme, with around 54% of applications approved.

However, Natasha Frangos, partner and head of corporate at accountancy firm haysmacintyre, says she has worked with several businesses that encountered difficulties when applying.

“The CBIL scheme is not really appropriate for loss-making, fast-growth businesses, for instance in tech or media,” she tells GTR.

“Those businesses tend to be loss-making because there are periods of investment while they’re developing their product, waiting for that turning point of reaching break-even – but even firms that have become profitable are still being turned down because they made a loss the previous year.”

Another issue is confusion around what information is needed to support an application as lenders are “not clearly setting out their expectations from the outset”, Frangos says.

“Some information requirements, such as forecasts, are still changing during the application process, and there’s a back-and-forth between the applicant and the lender,” she says. “The problem is, cash is fast running out and businesses don’t really have the luxury of time on their side.”