A proposal for a £5 billion taxpayer-backed fund to help businesses through the coronavirus crisis has been submitted to the Treasury with the backing of the Confederation of British Industry.
The Sunday Times reports the fund would be similar to the post-war 3i, but would rely on private sector investors to make the decisions.
The plans have been put together by the growth investor Foresight Ventures.
Additionally, the newspaper reports a campaign to “save our start-ups” will be launched this week to help those businesses that do not qualify for existing government relief schemes. Its backers include lastminute.com co-founder Brent Hoberman.
Meanwhile, Experience Travel Group co-founder Sam Clark lent his voice to a Sunday Times article warning of the threat to start-ups under the current government relief available for entrepreneurs.
The article said thousands of companies are “falling through the cracks” of the state support package.
Many bosses are finding they do not qualify for any of the emergency loan schemes for smaller businesses. If they do qualify, many say the terms will “merely delay the looming cash crunch”.
The government did expand its emergency loan programme last week, including a new lending scheme aimed at bigger companies excluded from the Coronavirus Business Interruption Loan Scheme (CBILS).
The government also said it was “banning” banks from demanding personal guarantees.
The Sunday Times reports The Corporate Finance Network estimates that between 800,000 and one million businesses will collapse in the next four weeks – almost a fifth of small companies.
The article reports start-up founders and investors who have worked with the state-funded economic development bank, the British Business Bank (BBB), is “meticulous but often slow-moving”. It has not expanded the number of banks approved to make loans under the CBILS to include alternative lenders, the newspaper reports.
The BBB said though the credit decision is fully delegated to the lender and the lender approves the loans. It added that almost 1,000 facilities worth £90.5million had been approved since CBILS was launched.
Although businesses seeking a loan still go directly to their lenders, the lender needs a sign-off from the BBB to secure backing from the government, in case the borrower defaults.
Businesses are also concerned that loans for larger companies are capped at £25 million.
And limiting the loans to companies with a £500 million turnover means there are still many in the “squeezed middle” that do not have access to emergency finance.
A report by the Supper Club, which represent about 500 fast-growing businesses with a turnover of more than £1 million, found that 86% of its members planned to switch to challenger banks if high street rivals “do not offer responsible support during the crisis”.
The report continues that some start-ups are not seen as eligible for loans and could miss any sort of funding.
For example small businesses could be refused grants being distributed by local authorities because they operate from co-working spaces, as they are not registered for small business rates relief.
Clark, co-founder and managing director of Experience Travel Group, told The Sunday Times when he applied to Barclays for a loan, he was told to provide detailed financial projections until September, despite the lockdown.
“I’m going to go through the process once more because it’s essential for us,” said Clark. “We’ve been told it will be a long process, and that’s okay for us, but we do need the certainty.”