20th April 2020 / COVID-19 Updates

Banks & Lending Institutions and Coronavirus – A Personal Perspective

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MAD Accountants, like all the best companies in any sector, like to ensure that we are up to date with all of the latest developments in the world of accounting and finance. At the moment, nothing is more front of mind for our clients than the impact that coronavirus has on their businesses and their livelihoods. For this blog, our Managing Director, Geoff Selby has shared his experience of banks and lending during the current coronavirus pandemic.

This blog is my personal opinion…but of course is also based on information that we receive as an accountancy firm and also part based on my own personal experience.

I am extremely frustrated with the way that UK banks and other lending institutions are handling finance claims from small businesses during this crisis. Not only am I disappointed with the apparent lack of completion rates for Coronavirus Business Interruption Loan Scheme (CBILS) applications but also the way the banks and lending institutions are managing mortgage and other finance payment holidays.

Why is that you may ask?

My frustration is really born out of my personal experience and the experience of our clients.

CBILS: While some businesses have had success in applying for and receiving the funding they require to hopefully keep their businesses afloat at this time via the CBILS, the vast majority of enquiries and applications are causing all sorts of problems including increased costs and frustrations for the small business owner. The figures do change daily but the number of successful claims is circa 2% of all applications. An incredibly low percentage given the time and effort that business owners will be going through to make the applications.

Considering the support that the government provided to the banks when the markets crashed and they needed a bailout, I find their apparent attitude to the CBILS applications bordering scandalous. I am fully aware that the banks must do their due diligence but only 20% of the loan amounts are at risk as the Govt is guaranteeing 80%. Surely the banks must be able to provide a better service at this time. Just saying you can apply for CBILS loan is not enough. We need to see action before some businesses have to close for good!

This is a time of crisis like we have never known before and businesses and individuals need help. The Government is throwing billions of pounds at this in an attempt to maintain the financial status quo for businesses and individuals. We are seeing several small (and some larger businesses) doing things for free to help people out and we are also seeing some fantastic ideas for raising money for the NHS and other front line key workers (thanks Captain Tom Moore) but the banks and lending institutions? Oh no, we aren’t doing anything for free or minimal cost. Their web sites and messages all look great and seem to be saying the right thing but the reality is very different.

Mortgage Payment Deferral: I, and I am sure many others, opted to defer my mortgage payment so I could keep as much cash available for myself and my business during this challenging time. I may not need it, but it made sense to protect not only my own livelihood but those of my employees as well. I fully expected to pay something to the banks for a mortgage repayment holiday…however, due to the way they work interest out, a mortgage holiday of three months is likely to cost me over £2,700 in additional interest. My mortgage has not been extended and the 3 months “holiday” will be added back into the payments to the end of the mortgage but £2,700…REALLY! That equates to a charge equivalent to nearly 10%. I would have thought that a better way for the bank to handle this and a way to keep us all on side would have been to add three months to the end of the mortgage plus having maybe a small administration fee. Surely that would have been a better way to handle this – they would still be getting the same amount of money with the same interest rate. Even HMRC are not charging penalties for any deferred VAT payments. Yes, the payment needs to be made by March 31st 2021 but there is no penalty until then. So why can't the banks do similar?

I would imagine that the banks are “rubbing their hands together with glee” when each application for a mortgage holiday is completed. The Abba song “Money, Money, Money” springs to mind.

This also applies to credit cards as well – if you take a payment holiday the interest will still be calculated each month therefore increasing your debt! They may argue that they are entitled to the interest but where is the benevolence in these really challenging times?

Mortgage and credit card payments are probably the highest monthly payments that an individual or business will pay each month…deferring payments should be a great option, but with penalties as high as they are, this just doesn’t seem to be right.

Come on guys, help us out here. Can we not see a more flexible approach rather than this very mercenary attitude?

M.A.D. Accountants are based in West Bridgford, Nottingham, and are specialists in tax and accountancy assistance for businesses and individuals. We're here to make a difference to your business and your life with no-nonsense, jargon-free advice and help.

Geoff Selby Managing Director
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