The Bank of England (BoE) is excluding many businesses from its short-term loans for coronavirus-related relief, critics say, by including restrictions based on credit ratings and short-term commercial paper use, according the Financial Times.
In a letter to the BoE this week, the British Retail Consortium (BRC) wrote that the vast majority of U.K. businesses do not meet the criteria, as they don't have a short-term or long-term credit rating.
The BoE's Covid Corporate Financing Facility (CCFF), part of a 330-billion-pound ($378 billion) bailout package crafted recently to help mitigate the revenue shortfall as businesses have to stay closed during the virus, will offer financing to businesses that have made material contributions to the economy by purchasing short-term commercial paper from the businesses.
To determine eligibility, the CCFF will assess credit ratings from before the virus hit, and firms with an investment grade rating will be prioritized.
But as the BRC noted, a great many businesses have never used short-term commercial paper, never having the need for it. The BRC pointed out that the absence of a credit rating doesn't mean a business isn't doing well as most businesses either use bank facilities or operate on a net cash basis.
Other elements of the bailout package have already been criticized, such as in the hospitality industry, where some have demanded more money be funneled into paying staff after establishments have had to close their doors.
The BoE notice did seem to give some indication that there could be wiggle room on the credit rating issue, saying that businesses don't need to have issued commercial paper to be eligible, and that standards would be reviewed on an individual basis for those businesses without credit ratings, determining if the institution is of equivalent financial strength.
However, low margins and inconsistent income for many businesses may not allow them to qualify anyway. The BRC said any retailers with bank agreements or which operate solely on cash should also qualify.