Treasury small business loans could be permanent

Treasury in talks with banks about making Government-backed loans to SMEs to help them grow a permanent offer.

The Government could support small business loans from banks indefinitely, extending the previous Covid financial support schemes.

Government officials are in talks with banks exploring ways Treasury-guaranteed small business loans could become a permanent feature, according to the Financial Times.

Over the course of the pandemic, £79,3bn business loans were made through Covid-19 financial support.

One person close to the talks told the newspaper that the focus is on supporting businesses to grow rather than just survive the pandemic or the current energy crisis.

“There is definite need for a permanent follow-up,” said a banking executive who had seen the questionnaire Government sent out to bank officials.

Among the questions asked is what level to set the Treasury guarantee (the £44bn Bounce Back Loan scheme had a 100 per cent guarantee, while the Coronavirus Business Interruption Loan Scheme was 80 per cent covered), whether personal guarantees would be needed, and what sort of companies should be eligible.

>See also: Government Bounce Back Loan for your small business

However, news that the Government is exploring ways to make state-backed guarantees for business loans permanent – encouraging historically reluctant banks to lend more freely to SMEs – is going to leave a bad taste in the mouth of those business lenders outside such a scheme.

The current Recovery Loan Scheme, which guarantees 80 per cent of a bank loan up to £10m ends on June 30. More than £3bn has been lent by British banks under the scheme, a senior industry executive told the Financial Times.

The previous Bounce Back Loan scheme has been criticised for handing out money to small businesses with few checks, leading to peer Lord Agnew calling the whole scheme “one of the most colossal cock-ups in recent government management”.

The Department for Business, Energy and Industrial Strategy believes £4.9bn could be unrecoverable through the £47.4bn Bounce Back Loan scheme.

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...