Small business owners are struggling to access government-backed loans as concerns about fraud and future defaults cause banks to restrict access to the scheme.
This week, the National Audit Office warned that up to £26bn of the £38bn already loaned under the bounceback loan scheme may never be repaid due to company failures and suspected criminal activity.
Although chancellor Rishi Sunak extended the application deadline until November 30, many banks are no longer offering bounceback loans or restricting them to existing customers. Businesses attempting to switch banks report long delays caused by the volume of applications and additional security checks.
“The system they’ve brought in to control potential fraud is now causing huge problems for valid claimants,” said Mr Bounceback, an anonymous businessman in the north of England whose website has helped thousands of people access the loan scheme. “People are watching the clock tick down on applications, and fear they won’t get the money.”
The NAO report highlighted feedback from two large lenders that applications from new customers may take between four and 12 weeks to process, although the deadline is eight weeks away.
Only a handful of lenders including Metro Bank, Barclays, Yorkshire Bank, Clydesdale Bank and Starling Bank are currently offering the bounceback loan to customers who switch — but much stricter verification processes are being used.
Several readers who took part in a live Q&A on FT.com this week said they had to drive hundreds of miles to attend face-to-face appointments with business managers in bank branches so their identities and documents could be verified prior to accounts being opened.
“I live in London and was advised to attend an appointment in Burnley, more than 249 miles away, as there are no appointments available here,” said Yusuf Aizen, a sole trader.
Starling Bank operates a “wait list” for new customers who wish to take out a bounceback loan and advises on its website that credit checks will be carried out on the company and directors as part of the process.
Conister, a digital bank based in the Isle of Man, was forced to pause access to the scheme when it received applications for £168m in bounceback loans within 72 hours, the majority from new customers. It is still processing applications for the £10m it has available to lend, meaning around one in 15 applicants will miss out on the finance.
However, small businesses on waiting lists which are not successful are finding that this snarls up subsequent applications with other lenders, which can demand written proof from the other bank that they have not already been granted a loan. Other readers said their business accounts had been frozen after the bounceback loan had been paid out.
FT reader and small business owner Sally Chamnessi said this had created “months of turmoil” for small companies struggling to access the loans. “It’s taken so long for many of us to find out why we were declined that our options have dried up,” she said.
Starling Bank said: “A number of customers are experiencing issues driven by data that has been compiled to allow banks to check that customers are not getting duplicate loans. This is an important anti-fraud check, to ensure that the money is being lent to genuine businesses. To support this, all lenders are required to consult a central database of bounce back loan applications prior to lending.”
The Department for Business, Energy and Industrial Strategy said: “We’ve looked to minimise fraud, with lenders implementing a range of protections including anti-money laundering and customer checks, as well as transaction monitoring controls. Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both.”