Unprepared and understaffed, banking insiders admit they also made mistakes. One says customer emails were too complicated, and some staff hadn’t paid attention to the training. They told desperate small business owners that they had no idea such an initiative existed.
The scheme also required the banks to exhaust their commercial lending appetite. In other words, they could only allow companies to access the CBILS once they had gone through a long process of making sure the borrowers were not eligible for any other products. This led to complaints that banks were trying to upsell to distressed companies.
“It was a massive PR nightmare, frankly,” says one banker. “Maybe it would have been better to have based the scheme on Help to Buy, given the banks the eligibility criteria, and just let them get on with it,” says another.
A week into the scheme, banks were already dropping the divisive requirement that any borrower had to put up personal guarantees on loans up to £250,000.
But the other flaws in the scheme meant that many companies were still struggling to get hold of the rescue cash, forcing Rishi Sunak, the Chancellor to reform the process just days after it had been launched. All viable businesses now had access to the CBILS. This made the scheme a lot simpler, and the money started to flow.
But figures published last week show that just 6,000 of the country’s nearly six million small businesses have accessed the money, a tiny fraction of the estimated 300,000 queries about the loans.
A Treasury source says officials realised the initial scheme was “not good” but hopes the process is showing signs of speeding up following Sunak’s reforms.
Stephen Jones, who runs bank lobby group UK Finance, last week urged MPs to be patient before changing the scheme again. But former Tory chancellors, opposition parties and business groups have added to a chorus of criticism in recent days that is becoming difficult for Sunak to ignore.
“The figures look pretty grim, so the scheme isn’t working, that is very clear,” says Ed Davey, co-leader of the Liberal
Democrats. Ed Miliband, shadow business secretary, adds that the state should fully underwrite the loans rather than just 80pc of the value as it currently does. “On the other side of the crisis, you will not wish you had done less but that you had done more,” he argues.
Similar schemes in Germany and Switzerland have been held up as examples to follow. Both are fully backed by the state, and Germany’s scheme has already lent out €7bn compared with just £1.1bn dispensed through the CBILS.
Banks still feel the need to put a big effort into the so-called “forward-looking viability assessment”, which is supposed to work out the chance of a company actually having a business on the other side of the crisis.
Many have said they are worried the British Business Bank, the administrator of the loans, will use inadequate assessments as an excuse to walk away from the 80pc of the loan that the Government is guaranteeing.
A board member of one large bank also believes the British Business Bank is under-resourced. “Banks feel like ham in the sandwich,” he says. “The Treasury wants loans made to prevent businesses collapsing now, but banks are frightened if they lend the money, and the business goes bust later, the FCA will blame them for giving them unaffordable debt – banks are damned if they do, and damned if they don’t.”