Streamlined loans needed to avoid liquidity crunch

Government-backed loans to construction businesses must be streamlined to avoid firms facing a liquidity crunch in the coming weeks. That is the headline finding of research by the Construction Leadership Council’s Covid-19 taskforce on financial support to the sector. 

Companies of all sizes and types took part in interviews and surveys for the research. Just 12% of surveyed firms’ applications for government-supported loans had been approved. 30% were rejected while 58% were still waiting for a decision. Firms face pressure on finances from both the current suspension of many projects and the need to invest soon to restart works.

SMEs are particularly hard hit as they often do not have the resource to wade through the current application process, shutting them out from much-needed support. The task force proposes that simple guidance is made available, helping businesses to get a decision. 

Some small businesses will benefit from the recently announced ‘bounce-back loan’ scheme, but many construction firms will be looking for support above its £50,000 threshold. 

If applications remain slow the government should step in, say the CLC Covid-19 taskforce, guaranteeing 100% of loans under the Coronavirus Business Interruption Loan Scheme. This would relieve pressure on banks to run a fine-tooth comb over every application, releasing funds that could save SMEs across the sector. 

The taskforce also recommends that banks should bump applications from companies supporting essential works - such as hospital and utilities construction - to the front of the queue where those from businesses that can show that they are facing immediate hardship. 

Construction Leadership Council joint chair Andy Mitchell said: “The government has done an astonishing job putting in place ground-breaking financial support to UK businesses in very short order. The Coronavirus Business Interruption Loan, Coronavirus Large Business Interruption Loan Scheme and Covid-19 Corporate Financing Facility are a shot in the arm for our sector and UK plc.

“We want to help make sure this vital support makes its way into the industry, providing short-term liquidity as companies get back to work after the Covid-19 crisis. We hope to work with the government and lenders to make sure this happens."

Hannah Vickers, chief executive at the Association for Consultancy and Engineering, said: “We looked at Germany which has a single streamlined process only doing its own checks on loans above €3m and on a fast-tracked self-certificated basis for loans below €10m. By moving towards a similar model in the UK we can save many vulnerable businesses in our sector.”

The taskforce will continue to monitor the financial health of the sector, assessing access to capital to start/restart projects and sector specific risks including trade credit insurance.