OakNorth Bank’s view on how to prevent British companies from failing in the next few weeks (short-term)

The British Business Bank’s Coronavirus Business Interruption Loan Scheme announced in last week’s Budget is insufficient for two key reasons: it is not available to new entrants and none of the criteria has been changed from the Enterprise Finance Guarantee Scheme.

For this Scheme to have the desired impact:

  1. it needs to be available for all SME loans up to £2m, not just £1.25m
  2. it should be based on relaxed eligibility criteria which enables quick drawdown. There should be automatic eligibility for all loans which were not already stress cases before the crisis
  3. it should be open to banks such as OakNorth Bank, which has in its four and a half years of existence, clearly demonstrated its support for SMEs

This Scheme needs to be deployed this week as businesses are running out of time – as Hospitality UK (which represents restaurants, hotels and bars) warned this morning, the hospitality and leisure industry is “four to six weeks away from running out of cash” and the country is facing “hundreds of thousands of redundancies” without urgent action.


OakNorth Bank’s view on how to stop British companies failing in the next few months (medium-term)

  • Revise the SME Capital discount, enabling more lending now
  • To protect growth businesses who are the genuine drivers of GDP growth, productivity, job creation and innovation, the Government should immediately review the existing SME capital discount (0.7916), which was introduced after the financial crisis to free up regulatory capital and improve lending conditions.
  • This capital discount should ensure that capital requirements for SME lending are more aligned to the risk weightings regulators use for buy-to-let lending (0.35).
  • As well as increasing the discount, the eligibility criteria for it should be widened to loans up to £10m and to businesses with up to £100m turnover, so that more SMEs can benefit from it.

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