Banks and Government officials have been meeting together over the last few weeks to discuss different ways that small business loans could become an ongoing thing. During the covid-19 pandemic, a staggering £79.3 billion was given in the form of loans to businesses to keep them afloat. The new loans, if they went ahead, would be for a slightly different reason. Instead of aiming at keeping businesses from failing and becoming unviable, the focus would be more on helping businesses to grow.

A Government questionnaire has been sent out recently to bank officials asking, amongst other things, what level to set the treasury guarantee, whether personal guarantees would be needed and what companies would be eligible for the loans. There were questions over how backed the loans should be by the government. Recent Bounce Back loans were 100% backed and the Coronavirus Business Interruption Loan Scheme was 80% backed. This means there is a possibility these new loans will also come with some form of government backing, though the amount is yet to be determined.

The only people set to be not so pleased about the possibility of banks offering more loan support to small businesses are the non bank lenders who have traditionally profited from banks being reluctant to help.

At the end of June this year, the Recovery Loan Scheme currently running in the UK that guarantees 80 percent of a bank loan up to £10m will end. Over three billion pounds have been lent under this scheme during the time it has run. 

There was also the Bounce Back Loan scheme running during the pandemic aimed at keeping businesses afloat in a time of crisis. This Bounce Back Loan scheme has been heavily criticized for lending money to businesses without enough checks in place, leading to fraud and situations where businesses are unable to pay back their loan. It is currently estimated that up to £4.9 billion could now be unrecoverable from the Bounce Back Loan scheme. 

The good news for small businesses who took advantage of the Bounce Back Loan scheme but are now in a position where they can't pay back their loan and their company is no longer viable, is that these loans were 100% backed by the government. In many circumstances, this will allow businesses to close and these loans to be covered by the government. This will give company directors the chance to clear their debt and start afresh. 

If your business is in a position where you will struggle to pay back your Bounce Back Loan and you would like more information about company insolvency then you can fill in this online form to speak to one of LCI Limited Company Insolvency's friendly debt advisors.