Five lenders withdraw from U.K.'s coronavirus rescue plan

Five lenders have temporarily withdrawn from the U.K. government’s Coronavirus Business Interruption Loan Scheme because they can’t handle the soaring demand for emergency loans from small and medium-sized businesses.

Four of these small lenders, which include Aldermore Bank, have disappeared from the list of participating institutions on the program’s website. A spokeswoman for the British Business Bank, the state-owned organization administering the plan, confirmed the lenders have asked to be removed until they can work through the applications they’ve received since the program went live on March 23.

Bloomberg

The lenders are part of a group of 40 institutions that were approved to make loans that are backed by an 80% government guarantee. The state will cover interest payments and fees for 12 months. Britain’s largest banks, including HSBC Holdings and Barclays, are part of the program.

The fifth lender, Chamber Acorn Fund (Humber) Ltd., which is based in Hull, northeastern England, is still listed on CBILS but said on its own website that it didn’t have sufficient capital to participate. It’s asking the British Business Bank for funding to rejoin. “Currently we suggest that your usual bank will be in a stronger financial position to assist you,” the lender is informing potential applicants.

The decrease in the roster of lenders comes as trade groups and lawmakers criticize the program as too bureaucratic to rapidly deliver relief. On March 31, Kevin Hollinrake and Seema Malhotra, Members of Parliament who belong to a cross-party business banking group, implored regulators to make it easier for small companies to access CBILS.

“The process is too slow and complex,” they wrote to senior officials at the Financial Conduct Authority, the Bank of England and the Treasury. “Businesses are desperate for funds now, they cannot wait days or weeks when they have payroll and supplier payment obligations to meet.”

For all the headaches, other lenders participating in CBILS are managing to cope with demand. Newable Ltd., a London firm, said it has diverted staff to handle applications that are running at 10 times normal levels.

Chris Manson, Newable’s chief executive, said he was impressed that the British Business Bank, working with Rishi Sunak, the chancellor of the exchequer, got the program up and running in just two weeks. “That type of scheme would usually take a year,” Manson said.

As of 2019, the British Business Bank had provided 6.6 billion pounds ($8.1 billion) to 89,000 companies ranging from startups to more mature growth-stage firms.