Financial support schemes such as the Recovery Loan Scheme could be made a permanent fixture in the United Kingdom.
Reports from the Financial Times have noted that the Treasury is in talks with banks in a bid to help support SMEs across what looks like being another set of challenging years. They intend to do this by encouraging them to borrow money without as many hoops to leap through.
During the pandemic, £79.3-billion was given out as part of the Covid-19 loan support schemes that were on offer and available.
A banking executive who has been in touch with the Government has said: “There is definite need for a permanent follow-up,” with regards to these easy borrowing schemes.
Discussions are ongoing about whether borrowers should need to have some personal guarantee. The Bounce Back Loan Scheme (BBLS) had a 100% guarantee from the government while the Business Interruption Loan Scheme had 80% covered – allowing for some personal liability. They also need discussions on what businesses would be eligible under future schemes of a similar feel.
However, the fact that the Government is looking at making these state-backed loans a permanent fixture could annoy business lenders who are not a part of this scheme. These organisations will undoubtedly lose out as potential borrowers would see that government guarantee as a winnable ticket by comparison.
We have covered the criticisms that have been in place for the ease at which Bounce Back Loans were distributed out. Arguably, it was reckless to distribute out loans here, there and everywhere without a decent level of checks on the borrowers.
It seems far too easy to slip into a difficult position of not knowing what you had initially signed up to: seeing the money before your eyes without a sensible repayment plan in place. Equally, the scheme opened the door to a good level of intentional fraud. So, perhaps rightly, there is still an element of scepticism with this across the board.
For SMEs across Britain, this could open up a new future for easier borrowing and a quicker scale for potential growth. Nonetheless, borrowers should tread carefully before signing up to these measures without thoroughly going over the terms and conditions.