Kevan has received a further update from Lloyds Banking Group:
There have been further developments this week in the support Lloyds Banking Group has put in place to help customers in your constituency who are dealing with the consequences of coronavirus that I want to draw to your attention, in case they might be helpful to you and your team. As before, please feel free to raise any issues we might be able to assist you with.
Enhanced support for business
You will have heard this morning that the Treasury has worked with the main banks to improve the financial support available to businesses experiencing cash-flow challenges as a result of the epidemic. We are delighted that the Chancellor has agreed to the simplify the CBIL scheme. From today all applications for support will be considered under the scheme.
The Chancellor’s announcement is a welcome broadening of the scheme which will mean that many more eligible businesses can benefit from 0% interest on term loans for the first 12 months. We’re pleased too by the announcement of (CLBILS) which provides much needed help for larger firms. We will continue to do all that we can to support our clients, large and small, in these difficult times.
One of the likely consequences of this simplification is that demand for loans under CBILS will increase sharply. We have been working flat out in recent days to build up our capacity to deal with greater volumes but it is worth recalling that even before these changes demand was already far higher than what we are used to dealing with. With the support of our regulators we have reorganised ourselves and our processes as fast as possible to put all available resource into supporting our business customers. But like all businesses we too are dealing with the human effect of the virus and social distancing measures on our staffing levels. Please bear with us.
The Government continues to require that eligibility for CBILS is based on viability. Not all small businesses will qualify for support, particularly if it has been reasonably assessed that the finance will not help the business to trade-out of its cash-flow difficulty, and will not prevent it from going out of business in the short-to-medium term.
We have received a number of inquiries about the working of CBILS from parliamentarians on behalf of their constituents. Please see below for some frequently asked questions which we hope might help you and your team, which we can send to you as an attachment if you prefer.
Additional support for larger businesses
The Chancellor also announced a new Coronavirus Large Business Interruption Loan Scheme (CLBILS). The additional acronym may be a mouthful, but this is a positive step in addressing help to the ‘missing middle’ – those businesses currently excluded from the schemes reserved for small and large businesses (CBILS and CCFF).
The new CLBILS will provide a government guarantee of 80pc to support banks in making available more loans of up to £25m to businesses with an annual turnover of between £45m and £500m. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced by the Government later this month.
Specific help for over-70s and NHS workers
Because our call centres are extremely busy at present, we have introduced a new, dedicated telephone service for the over-70s. This ensures that our elderly and more vulnerable customers can get through to personalised help quickly. We are writing to over three million customers who qualify to explain the support available, including details of the new telephone number and a guide on how best to manage their money and protect themselves from fraud.
In addition we are using our technology to fast-track NHS employees who call us so they don‘t have to wait. When they call our helplines they will automatically receive priority service. This is because we recognise the pressures they may already be facing on the country’s behalf. We are also working to identify any other customers who may need extra support, such as those who have previously informed us that they have specific service needs because of a vulnerability, and we will be deploying technology that will allow us to prioritise their calls through our existing telephone lines where possible. We are also taking steps to make it easier for customers to get access to cash where they are unable to leave their home owing to the current circumstances.
Meanwhile we continue to keep as many branches open as possible. We have had to close a number due to staff illness or to deep-clean them, and these closures can happen at short notice. Roughly 90pc of our branches remain open, on weekdays from 10am to 2pm. We have suspended our mobile branch service.
News for shareholders
Earlier this week our Board announced its decision not to make any dividend payments or share buybacks on Lloyds Banking Group shares until the end of 2020. In response to a request from our regulator to ensure that we are preserving resources to support customers, the Board also decided to cancel payment of the final 2019 dividend. Clearly this will come as a disappointment to our shareholders, many of whom are customers, but we feel this is a prudent step to take in the current circumstances.
As ever, if you require further clarification on anything raised in this email or on the steps we are taking to support customers, please do not hesitate to get in touch.
The measures we have announced to date are set our in greater detail on our dedicated COVID-19 website.
Group Public Affairs Director, Group Corporate Affairs
Support for Business affected by Coronavirus
What is THE Coronavirus Business interruption loan Scheme (CBILS)?
It’s the loan scheme set up by the Government to get taxpayer-backed cash to small businesses which have seen their cash-flow hit by coronavirus.
How does it work?
Eligible businesses can borrow up to £5m over six years, with the first year interest free. The business customer is liable for repayment of 100% of the loan. If a business doesn’t pay back the loan, the loss is shouldered 80% by the taxpayer and 20% by the bank/lender.
Who runs it?
The British Business Bank, the business lending arm of the Government which is run by the Department for Business Energy and Industrial Strategy.
Who sets the rules?
The initial rules were drawn up by HM Treasury and the British Business Bank to make sure the scheme was focused on those businesses in genuine need who had viable business models prior to the COVID-19 crisis.
Which businesses are eligible?
The Government and the British Business Bank set rules for the scheme from the outset, including:
- It is open to British businesses with a turnover of up to £45m that were financially healthy (‘viable’) before coronavirus.
- Only those that were unable to access normal bank lending could apply originally. The Chancellor changed the rules on Thursday evening to mean that banks are no longer obliged to offer normal lending as a first step, and can now offer CBILS to all eligible businesses.
- The business generates 50% or more of its income from selling goods or providing services.
- A small number of industries are not eligible under the British Business Bank scheme rules which can be found on their website.
Where do the banks come in?
More than 40 accredited lenders, including the main high street banks, have been licensed to process CBILS applications and hand out the cash. A full list is available on the British Business Bank’s website.
How was it created?
The scheme was developed by the Government, British Business Bank and the banks and built on an existing government support scheme for businesses – the Enterprise Finance Guarantee Scheme.
Why are businesses raising concerns?
The scheme was announced before the full details were decided and the lending available, hence some businesses were left understandably frustrated about their inability to access financial support quickly. There was also some confusion over eligibility, with many businesses believing the Government had said the scheme was open to all those affected by coronavirus. It took time to implement the scheme and for lenders to train all their front line staff to support customers.
Lenders have seen significant volumes of customers seeking to access funding in a short period of time, while also dealing with the challenges of staff needing to self-isolate or practise social distancing. Coronavirus has affected banks like any other business, resulting in call centre delays and processing backlogs as staff cope with huge demand.
Initially, with banks required by the British Business Bank to apply their own processes to obtain security against the loans, a number of banks had requirements for the owners of businesses to make personal guarantees, for example putting part of their home down as security for the loan in the event that the business itself was unable to repay. This is a routine part of commercial lending to make sure the borrower has an incentive to repay. This requirement has now been removed.
Some businesses have also been left disappointed after being assessed by their lender as not financially viable even before the outbreak of COVID-19. Banks are still required to assess that a business is able to afford the finance costs of any additional borrowing taken.
Why are unviable businesses excluded?
Given the cost of failure is ultimately borne by taxpayers, it was deemed not to be a good use of public funding to support businesses that are inherently not sustainable over the short-to-medium term. Businesses that are already in a weak financial position should not be encouraged to take on more debt.
How is viability assessed?
The lender must reasonably assess that:
- the finance will help the business to trade-out of any short-to-medium term cash-flow difficulty, and;
- if the facility is granted, the business should not go out of business in the short-to-medium term.
- when normal trading resumes, the business will be able to afford to repay the borrowing.
As with other external finance applications, businesses will need to have a sound borrowing proposal (notwithstanding the disruption caused by COVID-19). The evidence required to demonstrate this will vary by lender but might include providing information such as recent accounts and trading information, as well as cash-flow forecasts.
Following representations from the banks and the concerns of business groups the Government is now simplifying the scheme so that all eligible businesses seeking support are now considered for the scheme, regardless of whether the business customer meets the lender’s normal credit criteria. This means that more businesses will now be able to benefit from the one-year interest free period under the scheme.
Businesses must still however be assessed as viable.
How long should it take?
All banks are facing huge call volumes and all applications need to be processed by both the lender and also the British Business Bank. Smaller requests (less than £250,000) are expected to be processed the fastest.
What other schemes are available to help businesses?
Lenders have put in place a range of different measures to support their customers, including waiving arrangement fees for new overdrafts, overdraft limit increases, new or increased invoice discounting and finance facilities, and loan repayment holidays. The Bank of England has also taken steps to reduce the cost of bank lending under their normal credit criteria. For larger businesses, the Bank has put in place the Covid Corporate Financing Facility (CCFF) to support such businesses’ liquidity needs.
The Government has also announced a range of measures to help reduce (or defer) businesses’ costs, including paying a proportion of furloughed workers’ salaries and deferring businesses’ tax payments.
What about mid-sized businesses?
The Chancellor has announced a new scheme to help bigger businesses too. Mid-sized companies should benefit from the Coronavirus Large Business Interruption Scheme (CLBILS), although it is not yet ready for applications. This will be aimed at businesses with a turnover of between £45m and £500m which will be able to borrow up to £25m. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced by the government later this month.
27 March 2020:
Lloyds Banking Group have contacted Kevan with an update on the support they are providing to their customers:
Dear Mr Jones,
Support for your constituents affected by COVID-19
Further to my note last week, I wanted to update you on what Lloyds Banking Group is doing to support our customers and staff in your constituency as we try to adjust to the consequences of COVID-19 for people’s everyday lives. We understand how important it is for our customers to receive support with their finances and, at times like this, we recognise we need to do all we can to be there for them.
We’ve had a good response to our offer to put in place a payment holiday of up to three months for our personal mortgage customers if their household income has been affected. In just over a week, more than 70,000 homeowners have successfully applied for one. This means they will temporarily stop paying all or part of their monthly mortgage payment, which will be added onto their mortgage balance and repaid over the course of the remaining mortgage term. We are also waiving any missed payment fees for mortgage customers for three months.
Additionally, for anyone in the process of trying to buy a new home who has an existing mortgage offer with us, we have granted them an additional three months to complete their home purchase at the agreed rate.
Finally, the recent Bank of England base rate reductions totalling 0.65% will be passed on in full to mortgage customers of Lloyds Bank, Halifax and Bank of Scotland, helping to reduce their monthly household outgoings.
To help our customers manage their finances during this challenging period, we’ve announced that from 6 April our personal banking customers will be able to access a £300 overdraft, interest-free. The majority of customers who use overdrafts do not go over that limit, and thanks to the changes we have already announced, those who do will pay less interest than they used to.
As with mortgages, we are also offering our customers with personal loans a payment holiday. More than 30,000 customers have already taken up this offer. Similarly, there will be no missed payment fees for customers with loans, as well as credit cards and motor finance, for three months.
We would urge any customer who is worried about their financial situation to contact us. We are doing our utmost to answer all of these queries swiftly, though we ask that customers bear with us as our telephone lines are facing significantly higher demand resulting in delays. We are regularly updating the information we have online for those customers who can find answers that way.
Branches / access to cash
Given the Government’s guidance on social distancing, we have seen a marked decrease in the number of customers using our branches and ATMs in recent days. Our aim is to keep as many branches open as possible, while ensuring we abide by public health guidelines. To achieve this we have altered our shift pattern, so that only one shift operates in each branch. This means that our weekday opening hours are now 10am to 2pm and we have stopped weekend openings. As you might imagine, our staffing situation changes daily as our colleagues try to balance their desire to keep serving customers with changes in their personal circumstances. In some cases due to local issues branches have had to close suddenly, either for staffing reasons or to be cleaned. We recognise our duty to keep services going and are making every effort to keep as many open as possible.
Through our commercial relationship with the Post Office, customers can also pay in or withdraw money from their local post office. We are talking regularly to the Post Office to establish how their network is affected by COVID-19.
In order to reduce the risk of spreading the virus, we have made the difficult decision to suspend our Bank of Scotland and Lloyds Bank mobile branches, which visit over two hundred rural communities each week. We are contacting regular users of our mobile branches to offer support during this pause in service.
The supply of cash continues to operate as normal. LINK, which manages the largest network of cash machines, has said that ATM and cash use has fallen by around 50% in recent days. Nevertheless the industry is taking steps to make alternative forms of payment more available. So, for example, from 1 April, the contactless payment limit for all customers will increase from £30 to £45. Customers using mobile devices (such as Apple Pay) can make secure contactless payments above this limit at many retailers.
We have created a £2bn package of support to help small business through this uncertain period which includes the waiving of our standard arrangement fees for new overdrafts, overdraft limit increases and new or increased invoice discounting and finance facilities for businesses that are particularly affected. This is part of an £18 billion commitment made by the Group to support businesses during 2020. We are keeping our support under constant review as we learn more about what our customers are going through, and we are contacting many of our clients in the most affected sectors to offer capital repayment holidays and overdraft extensions to support their working capital needs.
Our focus over the past week has been specifically on helping the Government to develop and launch the Coronavirus Business Interruption Loan (CBIL) scheme for smaller businesses. It is now available to businesses with turnover up to £45m, for loans up to £5m, which will be fee free and have 12 months interest free. We recognise that the unavoidable gap between its announcement and the confirmation of the final details meant many customers were initially left frustrated when we were unable to answer their specific questions, but we are doing our best now to make up for lost time. We have already seen in excess of 15,000 views of our application site, 5,000 application forms downloaded, and more than 1,600 applications received. We have now also changed our approach so that lending of amounts less than £250,000 under the CBIL scheme does not require business owners to put up any personal guarantees as security.
The CBIL scheme is designed to be a valuable back-stop for those viable UK businesses affected by coronavirus that cannot currently access normal bank lending. Under the terms of the scheme, where we can offer finance on normal commercial terms, we will continue to do so – and at lower rates than previously was the case because of the recently announced Bank of England rate reduction and its Term Funding Scheme for SMEs. If we are not able to extend finance under our normal criteria, then the business’ eligibility will be considered under the CIBL scheme.
Our regulator has issued clear guidance around the critical role that financial services plays in ensuring that the economy continues to function. While many of our colleagues can work from home during this period, there are roles – including branch colleagues, call centre staff who for example process loan requests or mortgage holiday requests, and IT infrastructure maintenance – where this is not currently possible. We understand that we are asking a lot of these colleagues, and we do not take their contribution for granted.
That is why we are taking steps to reduce the risks for them, including through appropriate social distancing and enhanced cleaning procedures at our sites. We are also urgently seeking ways to allow many of these critical activities to be conducted remotely, and in a way that safeguards our customers’ data. Furthermore, we are reviewing all our activities with a view to halting temporarily all those that aren’t directly focused on supporting the economy through the crisis.
We have committed to stand by our colleagues regardless of the impact of the crisis on their ability to work. We are cooperating closely with our recognised unions to make sure that we have in place all possible steps to protect our customers and our staff.
I trust this information is useful to you. If you would like any further clarification, please do not hesitate to get in touch.
Group Public Affairs Director, Group Corporate Affairs
Lloyds Banking Group