British government hands businesses loan lifeline

British Chancellor Rishi Sunak has unveiled a scheme to give small businesses access to government-backed loans of up to 50,000 pounds ($62,476) after the banking sector was criticized for acting slowly in supporting companies during the novel coronavirus outbreak.

The loans, which will not need any interest or capital repayment for the first 12 months, only require a two-page application form and should be accessible within days.

"Never before have we been able to do something of this magnitude in such a short space of time," said Sunak, adding that the "microloan scheme" could provide a "simple, quick, easy" solution in such testing times.

The move comes after the Governor of the Bank of England Andrew Bailey said that the slowness of emergency lending "had to be sorted out" because it was putting so many businesses at risk.

Banks say the size of the workload, the time needed for credit checks and staffing issues have held up their work, but banking trade association UK Finance said the "welcome changes should enable banks to provide finance to businesses more quickly".

Some people had called on Sunak to underwrite all loans, not just those up to 50,000 pound cut-off point, but he said this was too much of a gamble with taxpayers' money.

"We should not ask the ordinary taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses who may, in some cases, have very little prospect of paying those loans back and not necessarily because of the impact of the coronavirus," he said.

One significant change from usual loan applications is that companies are not required to show that they will be economically viable in the future, just that they have been in the past, taking a lot of pressure off business owners.

The director-general of the Confederation of British Industry, Carolyn Fairbairn, called the move "transformational".

"Sole traders, micro-firms and entrepreneurs will now have a simple route to fast finance to stay afloat, without red tape or time-consuming checks," she said.

"Thousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster."

Meanwhile, Britain's airline sector has written to the chancellor urging him to extend the Coronavirus Job Retention Scheme, which sees the government subsidizing workers' wages, beyond June because it is expected that airlines will take so long to recover.

In a letter seen by Sky News, Tim Alderslade, chief executive of Airlines UK, said that if the scheme is "withdrawn prematurely, carriers experiencing only a tentative revenue recovery will face a renewed cash crisis".

"We believe that the scheme will need to be extended beyond June, and that consideration should be given to measures－including a 'tapering' of the scheme or a review on a sectoral basis－to avoid aviation facing a cliff-edge post-June, whilst services are scaled-up," the letter continued.