BRIDGEND MP Jamie Wallis has welcomed moves by UK Government to clamp down on banks trying to promote their own commercial loans to businesses instead of the government-backed ones available.
Dr Wallis was among MP’s to write to Chancellor Rishi Sunak urging him to intervene.
He said: “I am pleased that the government has listened to representations from MP’s and business leaders about what was going on. I was contacted by an accountant in Bridgend who told me that with all the applications for loans he was making on behalf of clients, banks were offering commercial loans with interest rates of between six and 12 per cent. Even with free interest for the first year, at 12 per cent businesses would have to pay £50K a month on a £5 million loan which is unsustainable long term for most small and medium sized enterprises.
“People should be given access to the government’s Business Interruption Loan Scheme. How can banks justify asking for 12 per cent when the Bank of England base rate is the lowest it has ever been? Banks are also asking directors to offer personal guarantees with everything they own being put up as collateral apart from their primary residences. Will business leaders risk losing almost everything they have worked for just to keep their businesses going?
“This leads me to feel that the banks are exploiting this situation especially as the government is offering loans through the banks which it is prepared to underwrite itself for up to 80 per cent of the amount. This leaves the banks exposed to just 20 per cent of the risk.”
