Banks holding us to ransom, say Islington businesses
Fears ‘high street could collapse completely’ due to interest rates being charged on rescue loans
03 April, 2020 — By Calum Fraser
Chancellor Rishi Sunak recently announced measures to help businesses survive the coronavirus crisis
FURIOUS business owners in Islington claim banks are holding their livelihoods to ransom over rescue packages by asking for “extortionate” interest rates on loans needed to survive the coronavirus crisis.
Chancellor Rishi Sunak announced help for businesses two weeks ago which included grants, tax breaks and access to government-backed loans that would be interest-free for a year.
But businesses in Islington applying for a loan have found that the interest rates after that first year can rise as high as 20 per cent, with banks also asking people to provide “personal guarantees”.
One entrepreneur, who works out of Finsbury Park but wanted to remain anonymous, told the Tribune: “As a society we bailed out the banks in 2008. Now it is the bank’s time to support the country. I have contacted my bank and I requested a temporary facility under the government-backed scheme. It is taking too long. The bank is asking for a 100 per cent personal guarantee and a government debenture with loans over £250,000 requiring security. This is making the process too long and that is having a real impact.”
Lee Hammerton, who founded the Hammerton Brewery off York Way, said: “I think banks are rubbing their hands, to be honest. Trying to get business directors to be guarantors is not right, they should not be doing that when the government is giving an 80 per cent guarantee.”
The warnings come as analysis by a group of accountants found that nearly 800,000 small businesses in the UK are likely to fold in the next few weeks unless the government steps in.
Mr Hammerton, who also runs the House of Hammerton pub in Holloway Road, added: “There are lots of stories of these loans being at high rates. This is not something that is appealing or potentially viable for us. The hole we are in could just get deeper by taking on more debt.”
Before coronavirus struck Hammerton hired 15 people, but all but one of them have been furloughed since the lockdown was announced.
Mr Hammerton said: “Our priority is to try to pay staff and hopefully claim back the money from the government, but that is still uncertain and we are taking a risk. We have an overdraft, which I guess we will have to go into further. It’s very precarious and I think a lot of good businesses could fold.”
Helena Farstad, who runs the Oak N4 wine bar and is chairwoman of the Stroud Green Road Traders’ Association, said: “I am sure a lot of businesses are wondering whether they can go on. There is so much risk involved if they take on more debt. The high street could completely collapse and people who live and work locally will have nowhere to go, which is a scary prospect. But I am hopeful that the government understands the urgency and will do something to help us.”
Ms Farstad and Mr Hammerton both said that they hoped shoppers who are looking for food and drink online will look into how they can support local businesses.
It is understood that the chancellor could make more announcements about the financial situation as soon as this evening (Friday), as the pressure mounts.
In the government’s daily briefing conference on Wednesday, business secretary Alok Sharma said: “It would be completely unacceptable if any banks were unfairly refusing funds to good businesses in financial difficulty.”
He added: “Just as the taxpayer stepped in to help the banks back in 2008, we will work with the banks to do everything they can to repay that favour and support the businesses and people of the United Kingdom in their time of need.”
Figures released yesterday by the Department for Work and Pensions found that nearly a million people had applied for unemployment benefits in the last two weeks.
The council’s finance chief Asima Shaikh said: “Local businesses are the lifeblood of our community and we are doing everything in our power to support them through these unprecedented times. We were absolutely on the front foot with this and processed £10million of business relief grants on Friday, within 24 hours of the government providing its guidance.”
She added: “We have been writing to businesses to assure them the grant aid is on its way, and in fact this money hit the bank accounts of businesses today. The remaining £45million is being processed as applications are received.”
She said that any small businesses that have not yet applied for a grant to do so by visiting www.islington.gov.uk/business/coronavirus-and-businesses