Bounce Back Loan MSE Survey results: HSBC & Tide worst service + new customers & sole traders struggle + delays common

Since early May, more than 860,000 bounce back loans have been approved by more than a dozen lenders. The loans – aimed at small businesses and worth between £2,000 and £50,000 with no interest charged or repayments needed in the first 12 months – were billed as being easy to apply for and quick to receive the funds. 

Between 19 and 26 June 2020, MSE conducted a detailed survey of 5,580 bounce back loan applicants, and we have now analysed the results, which are below. While not a statistically-representative poll of applicants, it provides a revealing report into the way that bounce back loans work.

The six key findings from our bounce back loan survey

1. Lloyds, Bank of Scotland and RBS triumph... while HSBC and Starling leave borrowers with a sour taste in the mouth

Surprisingly, many high street banks smacked the bottom of the challengers when it came to bounce back loan customer satisfaction. Banking giant Lloyds operated the best application process according to the survey, with a net positive score of 81%, followed by Bank of Scotland (65%) and RBS (50%).

Four of the 14 banks were net negative: Barclays and Starling (-1%) only just, but serious issues were found at HSBC (-45%) and challenger bank Tide (-90%), both of which had far more negative feedback than positive.

Some of this is because these banks offered accounts to new starters where there were many problems, yet not all of it is accounted for by that. Even among existing customers, HSBC scored -24% and Starling just 6%.

2. Sole traders let down by bounce back loan scheme, with limited companies far more likely to be accepted

While one in four sole traders who have received an answer were rejected, only 7% of those with limited companies were turned down.

The worst culprit was Starling, which rejected 57% of sole traders, while one-third of sole traders were turned down by TSB, Clydesdale and Metro Bank.

The Starling rejection rate was something we looked at when we sent a dossier on Starling to regulators after receiving complaints about its processes. At the time, we couldn't get data on whether its rejection rates were proportionate – this shows they are much higher than average for sole traders.

In comparison, Starling accepted 93% of applications from limited companies, while TSB, Metro Bank and Clydesdale accepted 81%, 92% and 96% respectively. 

3. One in four waited over a month to hear about 'quick and easy-to-access loans' where funds were supposed to arrive in days

Bounce back loans were originally discussed as being delivered in days, as a speedy solution to business problems in the pandemic. In fact, this is how they were sold by HM Treasury: "Britain's small businesses will be able to apply for quick and easy-to-access loans of up to £50,000 from today – with the cash expected to land within days."

It wasn't that speedy. While 71% of those who've got a decision heard within seven days whether they'd been accepted or rejected, 23% were (or still are) waiting for over a month – that's nearly one in four.

However, what's telling is acceptances tended to be far quicker than rejections. Of those accepted, more than 81% received their acceptance within seven days – though 6% have had to wait a month for their acceptance.

For those rejected, nearly one in four (23%) had to wait for more than a month before they found out they had been turned down, and only 38% found out within seven days. This delay would've compounded the problems for many struggling businesses that were likely on tenterhooks waiting for this money.

Among the worst offenders was HSBC. More than a third of those rejected by HSBC (42%) had to wait more than a month to find out. Meanwhile, only 8% of Bank of Scotland's rejected applicants had to wait that long.

Then we come to challenger bank Tide. It launched its offering late, but a staggering 97% of applicants are still waiting for a decision – a dire and disappointing situation.

4. HSBC, TSB and Starling hand out most rejections

While Lloyds Bank and RBS top the acceptance league, with 95% or more of the total applications given loans, not all banks were as keen to say yes.

Starling only accepted 62%, while TSB (72%) and HSBC (80%) also had significantly lower figures, though many of the HSBC rejections were for new customers.

Unfortunately, we can't give you a full picture of the likelihood of rejection from challenger bank Tide, as a staggering 97% of applications are still stuck in its system awaiting a decision.

5. New customers face uphill struggle to get accepted for bounce back loans

Only a handful of lenders opened up bounce back loan applications to new customers, and even some of those eventually restricted them to existing customers.

Overall, only one in two (47%) of all applications from new customers were accepted, compared to nine in 10 (89%) of existing customers.

• HSBC only accepted 36% of applications from new customers, compared to 94% from existing customers.

• Starling Bank accepted 58% from new customers (64% from existing customers).

• Lloyds Bank accepted 82% from new customers (96% from existing customers).

6. Credit scores and credit checks are what scuppered applications for these 'no credit checks needed' loans

When bounce back loans were launched, it was said that credit ratings and affordability checks (both personal and business) wouldn't impact firms' eligibility for the loans, and that applicants wouldn't need to prove the viability of their business.

Yet our survey has flagged that an applicant's credit rating or score was the most commonly cited reason behind rejection. Of more than 300 people who were rejected for bounce back loans, around a quarter cited having failed a credit check, with comments like:

"Because of poor credit rating."

"Credit check failed, they claimed they had a duty of care."

Underneath this – badly explained by many banks, and poorly communicated in the process – is the fact that some banks are carrying out soft credit checks. This means you'll see the search if you check your file, but lenders won't, so it doesn't impact your creditworthiness for future applications.

The British Business Bank (BBB) – which organises bounce back loans – says that while lenders cannot generally undertake credit checks for these applications, they can credit check applicants who are new customers and are opening an account with them for the first time.

Lenders can also do anti-fraud checks, known as anti-money laundering and know your customer checks, on existing customers applying for bounce back loans. These may be 'embedded' in a lender's existing credit checks, but if so, the lender must disregard 'pure credit' related flags (ie, ignore any info purely relating to a customer's creditworthiness when deciding whether to lend).

The BBB says that banks cannot undertake affordability checks as part of bounce back loan applications, as seen in the terms above, yet some anti-money laundering and fraud checks carried out do involve enquiries that are labelled as 'affordability checks' by credit-scoring services.