The small business champion ParcelHero has welcomed the latest revisions to the Government’s much-criticised Coronavirus Business Interruption Loan Scheme (CBILS), but it says until interest rates are capped on these loans, SME owners will resist taking them on.
Says ParcelHero’s Head of Consumer Research, David Jinks MILT: ‘ParcelHero called earlier this week for significant revisions to the CBILS scheme after it was revealed that, out of more than 130,000 enquiries from SMEs struggling with the impact of coronavirus, just 983 had been approved.
‘We said lenders should abide by the spirit of the new CBILS legislation, not the letter. Now the Government’s intentions leave no wriggle room. SMEs no longer need to have been turned down for a commercial loan before being considered for a CBILS loan, as the temptation was for banks to push desperate firms into their own commercial loans with high interest rates and strict security guarantees first. The Government-backed CBILS is interest-free for 12 months and has no set-up fees, so it’s small wonder lenders pushed many previously viable SMEs towards less attractive commercial loans. Clearly a leopard doesn’t change its spots overnight, even in the teeth of a crisis.
‘However, the Treasury has still not slapped restrictions on the interest rates that banks can charge for CBILS loans beyond the initial 12-month interest holiday. One national bank quoted customers interest rates as high as 12% for a CBILS loan; though typical CBILS rates seem to be between 2% and 6%. Considering the borrower always remains 100% liable for the debt and banks’ backs are being covered to the tune of 80% by the Government, 6% interest is still hardly attractive in the current conditions. We can see many more SMEs going to the wall rather than strike deals which could leave them struggling for years into the future.
‘It’s good news that the latest revamp halts this push to standard commercial loans. But even so, let’s not forget the Bank of England Base Rate is just 0.1% and we taxpayers are in line to cover 80% of any losses CBILS lenders do suffer. It’s no wonder typical CBILS interest rates of 6% or more are a bitter pill for many SMEs to have to swallow, especially as, for loans over £250,000, their business property and assets are likely to be on the line.
‘There is some good news for Britain’s beleaguered SMEs, however. The majority of UK and international destinations are still well-served by couriers, to ensure SME’s goods continue to get to customers safely. ParcelHero’s live UK courier services guide constantly updates which courier services are currently available to a particular destination. SMEs may no longer be able to access their exact usual delivery service but there is still a wide choice to compare at: https://www.parcelhero.com/en-gb/uk-courier-services’