Businesses across Europe have reported vastly different experiences in their efforts to secure the financial support promised by their respective governments’ economic stimulus packages. The scale of the demand has been staggering and understandably continues to pose a unique challenge to traditional financial institutions and their usual ways of doing business.
For context France received over 450,000 enquiries for loans from SMEs and self employed professionals, Germany over 400,000 and the UK over 300,000. In the first weeks of the roll out, France’s central bank claims to have distributed 22 Billion Euros to 150 000 SMEs. In Germany, the KfV announced that 140,000 applications were processed in the first few days of the scheme. Businesses in Germany were particularly satisfied with the process, with most successful applications receiving their loans within 24 hours of approval. It is worth noting however that in both countries numerous complaints have been made as to which companies qualified for support as well as the complexity in applying, especially for businesses not used to dealing in such matters.
By contrast in the UK, fewer than 2% of SMEs initially enquiring about government backed loans had been approved in the first weeks of the scheme. In addition, there were worrying reports that some banks were hiking up interest rates on these emergency loans despite government pledges to the contrary (not to mention record low interest rates). In a bid to expand the scheme and to improve outcomes for SMEs, the UK subsequently approved a new batch of institutions including digital banks OakNorth and Starling to provide government backed loans. This certainly seems to have helped matters with applications finally starting to roll in: as of this week more than £4.1 billion worth of loans have been paid out to just over 25,000 businesses, which represents close to 50% of the applications received. [Read more…]