Small lenders face curbs as UK's COVID-19 rescue scheme winds down

LONDON (Reuters) - Some small lenders issuing loans on behalf of Britain’s Coronavirus Business Interruption Loan Scheme (CBILS) risk running out of taxpayer-backed cash to lend before a Sept. 30 deadline for applications, three sources told Reuters.

FILE PHOTO: Britain's Chancellor of the Exchequer Rishi Sunak visits Peak Scientific, a Scottish manufacturer of gas generators for analytical laboratories in Glasgow, Scotland, Britain, August 7, 2020. Andy Buchanan/Pool via REUTERS/File Photo

The British Business Bank (BBB), which oversees CBILS and provides accreditation to participating lenders, has declined to top up allocations to some small lenders as the scheme draws to an end, said the sources, who declined to be named because the matter was commercially sensitive.

Some of these lenders were hoping to lend more than their original allocation in the final weeks of the demand-led, no-capacity scheme and were relying on top-ups to issue timely loans to customers, one of the sources said.

A potential scarcity of loans coupled with a looming deadline have raised fears more companies may struggle to get the funds they need.

A spokesman for the BBB said it treated each lender request for funds on its merits.

“If, occasionally, we have not been able to support an individual lender’s increased allocation (to the level requested) it is for commercial reasons specific to the individual lender,” the spokesman added.

The squeeze in CBILS allocations comes after the BBB said it would allow banks until Nov. 30 to review and approve loan requests received before Sept. 30.

Another source said customers of smaller lenders who hit limits on CBILS lending before Sept. 30 would have to try larger banks which continue to have ample sums to lend.

“The CBIL Scheme closing to new applications from end- September is a real cause of concern,” Alasdair McPherson, Head of Partnerships at business finance consultants Rangewell.

“As with any ‘hard cut-off date’, we’re going to see a last minute rush of applications - probably leading to a repetition of the early days of the scheme when lenders were inundated,” he said.

Fledgling lender ThinCats on Thursday called on UK finance minister Rishi Sunak to extend CBILS until spring 2021 to support firms who might have enough cash to survive in the short term but who may need additional capital beyond September.

ThinCats has warned some customers they may not receive loans unless they apply before Aug. 31, a month prior to the official deadline, citing “overwhelming demand”.

The BBB said the government has indicated it will make an announcement on the future of CBILS next month.

Reporting By Sinead Cruise; Editing by Chizu Nomiyama