Indeed, bit of a no-brainer, and I'll almost certainly be applying, assuming it's as easy as some are making it sound.
Thing I'm a bit wary about, though, is whether to apply for the limit available or thereabouts, or whether to pitch lower if that makes it more likely that the loan will be granted.
Was thinking of claiming for a similar amount to the grant I'll be getting (assuming my calculations are correct), which would only be about half of the loan limit of 25% of turnover.
But will be interesting to see what they'll need in terms of proof of income/identity and the like if it's just a one-page online form. Of course, to a degree the banks won't be bothered if the Government are guaranteeng 100% of the loans, but on the other hand they won't simply be handing out money willy nilly, and the government won't let them do that.
Interesting piece in the Telegraph, which maybe supports what I said about the loans being a substitute for the grants, and that the government will be expecting widespread defaults. But at least they know they'll get some of the cash back, unlike the grants.
But the banks seem a bit unhappy about it all, as per the article below, so it'll be interesting to see what happens on Monday when it's supposed to all be up and running.
Rishi Sunak's Bounce Back loans are in danger of falling flathttps://www.telegraph.co.uk/business/20 ... ling-flat/The flaws in the Government’s emergency loan scheme are pretty well understood at this point. Essentially it was too complicated, involved too many interested parties and was therefore too slow. (And arguably it was a mistake to name the programme after Basil Fawlty’s wife.) The Government guaranteed 80pc of the money through the Coronavirus Business Interruption Loan Scheme (CBILS), but the banks were on the hook for the other 20pc. This meant they had to go through the whole rigmarole of assessing whether companies were likely to survive this crisis and could repay the loans. That took way too much time. Changes have been made, the process has been streamlined and the pace of approvals has picked up. But money is still flowing too slowly.
And it is flowing slowest to the smallest companies - the many thousands of outfits with just a small handful of employees that constitute the backbone of the nation’s economy. “Customer service has been poor, the application process has been arduous, and the wait times for decisions have been lengthy,” according to the Federation of Small Businesses.
To combat all this, Rishi Sunak, the Chancellor, has come up with a new so-called Bounce Back Loan. The new scheme goes live on Monday with loans that are 100pc guaranteed by the Government. Small businesses that are running out of cash during the lockdown will be offered micro-loans for 25pc of their turnover, up to a maximum of £50,000. Applicants will only have a one-page application form to fill out and will not be subject to any viability tests.
So, problem solved, right? I’m afraid not.
The Government has said it will pay the interest for the first 12 months, but borrowers won’t know what rate they will be paying thereafter.
The loans are 100pc backed by the Government but - please excuse me for stating the obvious - they are still loans. And the defining feature of loans is that they must be paid back. This may sound obvious, but some of the bankers I have spoken to are worried that not everyone gets this rather crucial point. They say that they have talked to MPs, business trade bodies and companies who are under the distinct impression that these are “soft loans”, more akin to grants, and that the Treasury will end up writing off the vast majority of them.
That may or may not be true. But it’s definitely not the impression the Treasury is giving the banks. It has told them in no uncertain terms that it wants the money back (or as much of it as possible).
So, at the same time as they are trying to get the money out of the door, banks are worrying about what happens if it doesn’t make the return trip. Here the concern is three-fold. They are worried about the reputational risk if this all goes wrong, that the guarantee won’t be honoured if it is found that they didn’t make appropriate checks, and whether they will face prosecution if it is shown that they lent money to companies who couldn’t afford it.
On the first two points the banks deserve nothing but a stirring symphony played by an orchestra of the world’s tiniest violins. Mark Carney said banks were the problem in the last crisis and would be part of the solution this time round. If they flunk this test because they are worried about bad PR or some relatively insignificant losses, they deserve everything coming to them.
Here’s the kind of statistic to make the toes curl: for every £1 that UK banks lend to small- and medium-sized enterprises in the manufacturing sector, they lend £155 in mortgages. They could quadruple their lending to small manufacturers and it would still be a pimple on the backside of their balance sheets.
But on the last concern, the law is the law; Section 140A of the Consumer Credit Act to be precise. The very smallest businesses are covered by this because the regulators effectively count them as individuals rather than companies.
This law relates to whether there is an “unfair relationship” between the debtor and the creditor arising out of their agreement. It is pretty comprehensive. It covers anything done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement). Normally a debtor who alleged that the relationship was unfair would have to prove it. But under this law, the creditor has to prove that it was not.
In other words, the Government can guarantee the loans and set out the terms of the agreement that the bank uses, but if the borrower gets into trouble, they or their lawyers could still claim those terms created an unfair relationship and the banks would have to prove it didn’t.
There are a whole range of other rules designed to prevent banks from lending money to borrowers who will be unable to pay it back. There’s also the FCA’s senior managers regime, which means that bankers who make reckless decisions face jail time.
There is nothing wrong with these rules. They protect all concerned - the borrowers from being saddled with too much debt, the banks from being crippled by bad loans and the taxpayer from having to bail out reckless banks lest they collapse and take the financial system with them.
But they become a problem when the world is side-swiped by a pandemic that results in the global economy being put in the deep freeze and you need to get billions of pounds to companies at risk of going under through no fault of their own in a matter of weeks.
These laws could be a genuine impediment or just be allowing the banks to get their excuses in early. In the final analysis, that distinction doesn’t really matter. What matters is that they could be an obstacle to money getting to where it is needed. For that reason, the Government needs to think fast about how they can be suspended or changed.
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Also this, if anyone's interesting, about some Scottish businesses taking legal action against the SNP Government over how they're distributing the cash from Westminster intended for certain business sectors - as I said the SNP are using different eligibility criteria to Westminster, and funnelling the cash elsewhere, so some businesses are feeling short-changed and crying foul:
Sturgeon nightmare: Scottish businesses take legal action to demand same deal as Englandhttps://www.express.co.uk/news/uk/12765 ... ews-latestA LEGAL bid over how the Scottish Government is spending the £2.2billion it was handed by the UK Government during the coronavirus crisis has been ruled as "suitable for urgent consideration" by a judge.Two Scottish companies in Edinburgh, Bruce Taverns and Kilimanjaro Coffee, have sought judicial review after accusing ministers of behaving in an “irrational” and “unlawful" way after Nicola Sturgeon's finance minister announced businesses and charities in Scotland that face economic ruin during the coronavirus pandemic will receive a grant of up to £25,000. But this was in comparison to England where businesses and chains can receive up to £150,000 and in Wales where they can get a £200,000 grant - despite all countries receiving the same amount from Chancellor Rishi Sunak.
The legal bid calls for Scottish companies and businesses to secure exactly the same compensation as in England and Wales.
Lord Fairley found the bid "competent" and said it was "suitable for urgent consideration” in the Court of Session.
Jon Sharp, from Kilimanjaro Coffee, told The Scottish Times: "There is no logic to the Scottish government’s behaviour. We simply want the same deal as businesses in England and Wales.”
Scottish Finance Minister Kate Forbes sparked fury when she announced a £25,000 grant for "hospitality, leisure and retail properties with a rateable value between £18,000 and £51,000".
This is because in England, chain businesses including restaurants, pubs, shops and hotels can receive grants of up to £25,000 per property, which would see a chain of six be handed £150,000.
But in Scotland, the grants are only made per business meaning an equivalent company with six outlets receives just £25,000.
This was despite Ms Sturgeon saying she would pass on “every penny” and economic secretary Fiona Hyslop saying its policy would “mirror the package of measures announced”.
Michael Lumsden, who owns a chain of health spas in England and Scotland, said Ms Forbes was "out of her depth" and accused Holyrood of dragging Scottish businesses "under the water".
He told The Times: “Ms Forbes’s article was confused, insulting to the businesses affected and added no new information in answer to all the questions that the Scottish public are now rightly asking.
“Unfortunately the cabinet secretary appears to be well out of her depth, and her government determined to drag under water the Scottish businesses who are truly the backbone of the economy."
Jon Sharp, owner of a chain of six coffee shops in the Scottish city Edinburgh, said the move was “incredible, almost unbelievable”.
In a letter to Ms Forbes and secretary for the economy Fiona Hyslop, he said: “I hope you change course before people actually hit the wall.
"You still have time to do the right thing before real damage is done but you will need to act quickly as a few are on the very edge right now.”
So far £526million has been given to 45,387 Scottish firms while the Scottish parliament’s economy committee revealed a total of 74,216 grant applications has been received by local councils.
The Scottish government said it had outlined £2.3 billion of financial support for Scottish businesses, “going beyond the consequentials received from the UK government”.
A spokeswoman added: “We have only today received intimation of a legal challenge and we will consider the position carefully and decide what to do in response.”
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