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Author: Sacha Bright & Oliver Murphy
Chancellor Rishi Sunak is considering whether to offer 100 percent guarantees on loans to Britain’s smallest businesses, after coming under sustained pressure from the Bank of England.
The news comes after Mr Sunak was “not convinced” that the government should underwrite 100 per cent of all loans in the coronavirus business loan schemes.
Bank of England governor Andrew Bailey, three ex-Conservative Chancellors and Tory MPs have put the Chancellor under sustained pressure to amend the coronavirus business interruption loan scheme (CBILS) for a third time.
The Coronavirus Business Interruption Loan Scheme (CBILS) and coronavirus large business interruption loan scheme (CLBILS) offers government-backed loans to viable companies struggling because of the impact of Covid-19.
The government guarantees 80 percent of each bank loan, taking on most of the default risk.
However, calls have grown from business bodies and Labour shadow business secretary Ed Miliband that the government should underwrite 100 percent of each loan to increase the speed of loan approvals.
According to the Financial Times, Mr Sunak is “weighing up” whether to go against his instincts and offer full state backing for 100% loans of up to £25,000 to microbusinesses.
“We have got to keep these small businesses alive,” Mark Francois MP told the FT. “The banks should be stepping up to the plate but they are not. If that is the case, the government may have to go to 100 percent.”
Kevin Hollinrake MP, chair of the APPG on Fair Business Banking, said: “Throughout the crisis, the chancellor has been willing to listen to feedback and adapt the government’s economic response. The Treasury’s loan scheme has started to make some headway, but for far too many businesses it’s still not delivering on the ground. To ensure the scheme fulfils its
objectives, improvements must be made quickly, or countless small firms will be left out in the cold.”
Responding to the news, CEO of NextFin Sacha Bright, said: “100% guaranteed loans with no risk to a lender has to be weighed up carefully. The problem is that a large percentage of these businesses will not be able to pay these loans back. However 80% guarantees are not working. My advice to the Chancellor is that he needs to provide 100% loan guarantees, and he needs to include P2P lenders so the loans are issued fast and he needs to also make provisions for collection of the loans when in default as the admin will cripple lenders. To do nothing will be far worse for the economy”
Disclaimer
To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed.
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mark davis
4 years
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