Government officials from the Department for Business, Energy and Industrial Strategy (DBEI) are seeking to provide a permanent replacement for the various loan programs that have allowed banks to lend to struggling businesses during the coronavirus pandemic.
According to FinancialTimes.
It would likely focus on SMEs that would otherwise find affordable financing for their hard-to-get loans.
Over the past two years, the government has backed £77billion in bank loans through various temporary schemes which guaranteed losses to banks. The biggest was the rebound loan scheme, which offered 100% guarantees for around £44bn of loans of up to £50,000 to 1.1m small businesses.
Any future loan scheme would focus on supporting the growth of UK businesses, rather than preventing businesses from collapsing by keeping them financially afloat, FT reports.
A banking executive, who had seen the questionnaire distributed by government officials, told the publication that the program should work alongside commercial loans, not replace them.
A government official said no decision had been made on whether to continue with a new scheme, but said there was ‘acceptance’ that a permanent scheme would be needed to guard against future discrepancies.
Before the pandemic, the government offered the Business Finance Guarantee (EFG) scheme, which offered the lender a government-backed guarantee of up to 75%.
Ravi Anand, managing director of lender ThinCats, said there were “good policy reasons for having a permanent program, including to encourage lending beyond a provider’s normal criteria, to encourage growth and potentially the ESG behavior, as well as something that can be adapted quickly to the market in times of stress”.