Emergency SME loans exceed £1.1bn but scheme criticised

Banks and other lenders have provided more than £1.1bn of emergency loans to small and medium sized enterprises (SMEs) under the government's business interruption loan scheme, industry figures showed.

UK Finance said 6,020 loans had been made through the scheme, more than double the number a week earlier. After a rocky start the number of loans increased from 240 a day on 2 April to 910 on 8 April. 1,800 loans worth more than £300m were recorded over the Easter weekend.

Total lending has increased from £453m on 6 April to £1.12bn a week later, UK Finance, the industry's trade body, said. But the improved figures still showed the UK lagging behind other countries such as Germany in getting cash to struggling SMEs.

Chancellor Rishi Sunak said: “Getting finance to businesses is a key part of our plan to support jobs and the economy during this crisis - and we’re working with lenders to ensure support reaches those in need as soon as physically possible."

The scheme has been criticised after Sunak said he would do whatever it takes to save viable businesses during the Covid-19 economic lockdown. Banks originally asked business owners for personal guarantees, which the government then banned, and have offered many SMEs commercial loans instead of 12-month interest-free loans backed by the government.

Critics said loans were still not reaching struggling businesses quickly enough. Huw van Steenis, an adviser to Mark Carney when he ran the Bank of England, said the government should increase its guarantee from 80% to 100% for the smallest firms.

In an article in The Times, Van Steenis said Germany had lent €7bn to small businesses and had guaranteed 100% of the loans. The Swiss scheme has made loans to 76,000 SMEs – 18 times the UK scheme, he added.

Ed Miliband, the opposition Labour party's business spokesman, echoed the criticism. He said: “These figures show that the CBIL scheme is simply not working well enough. We need change now. The Chancellor must move to a 100% guarantee of loans for smaller businesses as other countries have done."