‘Nearly a million small firms could run out of cash within the next four weeks as they struggle to access the Government’s widely criticised emergency coronavirus loans support, research has warned.
A report by The Corporate Finance Network of accountants predicts that almost a fifth – 18% – of Britain’s five million small businesses will not be able to survive the next month despite the taxpayer-backed loan scheme.
This could see nearly four million staff lose their jobs in May, it cautioned, adding that as many as 42% of small firms could go bust if the lockdown lasts for four months or more.
The findings have heaped more pressure on Chancellor Rishi Sunak to overhaul his taxpayer-backed emergency loans scheme for hard-hit businesses amid fears it is failing to offer the support needed.
The Treasury insisted on Wednesday that “hundreds” of loans had already been issued through the scheme.
“Hundreds of these loans have gone out. Obviously different banks work in different ways, but cash has very much gone out of the door,” a spokesman said.
But lenders have come under heavy fire amid claims of unfair lending tactics, with some demanding personal guarantees from business owners and others seeking to apply high interest rates once the interest rate-free initial period ends.
The Business, Energy and Industrial Strategy Committee cautioned on Tuesday that problems with the scheme were putting off many firms from accessing the cash.
Rachel Reeves, chairwoman of the cross-party committee of MPs, has written to Mr Sunak outlining concerns over the way lenders are “interpreting” the emergency loan scheme and calling for him to clarify the terms and conditions.
Swathes of small firms have been complaining the scheme is hard to access and that it is not a level playing field, with banks being given too much leeway.
The coronavirus loans scheme is designed to offer companies up to £5 million interest free for the first year to help shore up their businesses.’