Sunak bans banks charging ripoff loans to ailing firms

The Chancellor will today ban banks from imposing their own expensive loans on firms battling to survive the Covid19 crisis.

Rishi Sunak is stepping in after lenders were said to be exploiting businesses by turning down applications for the Government’s cash support scheme.

Some banks have been telling company bosses they can get one of their own loans instead.

But these are typically more expensive than the Governmentbacked Coronavirus Business Interruption Loan Scheme, which is free of interest for the first year.

Mr Sunak is now overhauling the programme and is expected to scrap the need for banks to assess whether a firm is eligible for one of its own loans first. Lenders will also be told to drop demands for personal guarantees when borrowing less than £250,000.

Last night the Chancellor also launched a new version of the business interruption loan scheme so larger firms with a turnover of between £45million and £500million can apply for this support from their banks.

A third scheme supporting the largest UK companies has already provided them with £1.9billion and another £1.6billion will be granted on Monday, the Treasury said.

In total, the government is offering £ 330billion of support. Mr Sunak said: ‘We are making great progress on getting much-needed support out to businesses to help manage their cashflows during this difficult time.’

The action came after warnings that up to one million small and medium-sized firms could go bust without emergency help.

There have been 130,000 inquiries from firms about the business interruption loan scheme since it launched less than two weeks ago. So far, loans have only been approved for nearly 1,000 small and medium- sized firms. Dame Carolyn Fairbairn, director general of the CBI, said: ‘The Chancellor’s measures are a big step forward.’

Banks are said to be furious they have been blamed for simply following rules set by the Treasury.