Firms struggling to secure emergency loans under government scheme warned to steer clear of brokers charging to ‘fast track’ applications
Loan arranger: Chancellor Rishi Sunak
Cash-strapped firms struggling to secure emergency loans under a government scheme have been warned to steer clear of brokers charging thousands of pounds in fees to ‘fast track’ their application.
Treasury officials and the City watchdog expressed concern after it emerged a Chelmsford-based company is charging £500 upfront, then a percentage of the value of the loan if the application is successful.
Despite a recent surge in approvals, banks have been lambasted by MPs and business groups for making it too difficult to obtain a Coronavirus Business Interruption Loan.
This has created a lucrative opportunity for loan brokers – some of which are charging upfront fees to help firms with their application, whether it is successful or not.
Others are charging a percentage of the value of the loan if it is approved on top of, or instead of, this. This is typically charged at up to 3 per cent, which equates to a fee of £15,000 on a £500,000 loan.
The development has come to light after a plumbing firm applied to Lloyds for an emergency loan and heard nothing back.
They were subsequently contacted by a broker called Think Business Loans, in an email headed: ‘Fast Track Your Application for the Government’s CBIL Scheme Today.’
It added: ‘Our lending managers are working with the big banks and the lenders on our panel, streamlining your applications.’
The firm charges £500 upfront, followed by 1.5 per cent of the value of the loan if approved.
The director of the plumping company did not want to be named, but told the Mail: ‘We find this totally unethical in the current climate. Some companies could find themselves out of pocket before even getting help.’
A Treasury spokesman said: ‘Nobody should be charging upfront fees to businesses to access emergency loans designed to keep them afloat.’
The FCA urged firms to go directly to accredited lenders or the British Business Bank for help.
A spokesman said: ‘Firms should not need to use brokers or other intermediaries to make an application.’
Think Business Loans said it makes no profit from its initial fees, and only launched the service after being swamped with requests for help from small companies struggling to get a loan from their bank.
It also told the Mail that it only promises it can fast track the application process, not the decision by the bank on whether to approve the loan.
Founder Jamie Stewart said: ‘Our customers were having trouble getting their applications accepted directly by lenders and so asked for our help. We set our fees at half of the National Association Of Commercial Finance Brokers’ recommended rate, and we don’t make any profit on the upfront part.’