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Law360, London (May 27, 2020, 3:40 PM BST) -- British lenders have approved £27.5 billion ($33.5 billion) of loans to businesses under three government-backed programs aimed at keeping companies viable during the COVID-19 crisis, a finance industry group said Wednesday.
Banks have given the green light to more than 650,000 loans through the government's three schemes for British businesses, UK Finance said. The financial sector approved more than £5.4 billion in lending to over 146,000 companies in the past week, the group said.
"The banking and finance industry has a clear plan to help businesses get through these tough times," Stephen Jones, chief executive of UK Finance, said. "It's important to remember that any lending provided under government-backed schemes is a debt not a grant, and so firms should carefully consider their ability to repay before applying."
The government announced so-called bounce back loans in April to allow small companies and sole traders to borrow up to £50,000 amid the coronavirus pandemic. The amounts are less risky for banks to lend as they are guaranteed by the British government.
The program has met some criticism for the slow pace at which banks approved loans to small businesses. The government has been forced to reform the program following early criticism from MPs.
The Financial Conduct Authority wrote to bank chief executives in April reminding them of their responsibility to ensure lending decisions were fair, after politicians sought reassurances that lenders were not putting their financial interests ahead of those of their customers.
But UK Finance said Wednesday that banks have so far provided 608,000 loans totaling £18.45 billion under the bounce back loan scheme,
Small companies are able to borrow 25% of their turnover, up to £50,000, with the loans being 100% guaranteed by the state. The loans will also be interest-free for the first year.
The bounce back scheme was the latest step in a package of measures launched by Chancellor Rishi Sunak.
The business interruption loan scheme was announced on March 17 and offered loans of up to £5 million for businesses with turnover of £45 million or less. That was later extended to other, larger companies, which could secure loans of up to £25 million, while businesses with turnover of more than £250 million could gain loans of up to £50 million.
Lenders have supported 43,000 businesses through the business interruption loans, amounting to £8.2 billion in lending, UK Finance said Wednesday. And 154 larger companies have been awarded £820 million under the extended program.
The British Chambers of Commerce, which represents businesses across the country, said in April that 16% of the 1,000 British businesses it quizzed held less than a month's worth of cash in reserve, while 6% reported having no money in reserve.
--Editing by Alyssa Miller.
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