Apart from the moral question of Why should business people put themselves into debt to solve a Government self inflicted scenario?
They should have stopped the planes, and quaranteened returning UK Nationals 3 months earlier.
There is a fundamental problem with using the banks to distribute cash. This is that the banks understandably look for security. Big businesses sometimes have available assets, but more often than not they don’t.
As a consequence money is leant to organisations with healthy balance sheets, who don’t need the money and store it for a rainy day or for acquisition. And they don’t lend it the firms who need it. Not the Banks fault, just bad Government Policy.
Further the people who need it, would by definition spend it, putting cash into the economy.
This in turn with take advantage of The Velocity of Money, namely the same £100 gets spent many times thereby benefiting many people. This massively reduces the size of the bill that we the taxpayers are going to have to repay.
One of our members was sent this by their Finance Broker
“The Credit Reference Agencies have today announced that businesses on payment plans due to COVID-19 should not have their credit score negatively affected. This should give some peace of mind to businesses.
Last week the Government made a sweeping change to the Coronavirus Business Interruption Loan (CBIL), where they have removed the requirement for personal guarantees (PG’s) or for the need to look at personal assets, for loans under £250,000. A bold move, but one that has been widely welcomed by the business community.
Whilst this is indeed excellent for some, I fear that this will make the bar a little higher to reach and in the long run have a negative effect on some businesses being able to qualify for the CBIL scheme via the bank. In fact a few of our alternative CBIL lenders withdrew from the scheme as they are unable to lend without a PG. A big blow I felt.
Data from UK Finance show that banks have paid out just £291.9m to just over 2,000 businesses under the coronavirus business interruption loan scheme. This translates as an approval rate of just 0.65%. This was published in the National Association Of Commercial Finance Brokers (NACFB) newsletter today. ”
So the approval rate of loans is 0.65% .
That means that for every 1000 businesses that have applied 6.5 got approval. The rest wasted their time.
The Government has made available £330 billion in loans and guarantees, and £291 million has been lent so far that is 0.09% IT’S NOT WORKING
That feels like cherry picking to me. It certainly is not working. Happy to be wrong about this, I hope I am. But if this is true the Government needs to Change Tack and do so fast.
CLICK HERE to see our advice and solution. There are some 25 million households UK give them £1000 a month, for three months. Cost £75 billion. Which is 1/4 of 330 billion and would have the effect of £225 billion (See The Velocity of Money blog) and raise £75 billion in taxes through corporation tax and VAT. Not to mention the saving of a million businesses and the associated jobs.
These are we accept back of an envelope calculations, but that could be out by a 16 and still make sense. A 1/4 the price and 4 times the benefit.
It is an interesting conundrum, because it is not about giving to the rich in proportion to previous earnings, because the rich will invest or spend it abroad. It is about supporting the poor, the Front line workers, bus drivers and nurses who are putting their lives on the line, but who in addition will spend the money,and put cash into the economy, because they need to. Yet again Government policy is upside down.