Originally written by Timothy Adler on Small Business
If so, that could mean the taxpayer having to find over £20bn to cover small business loans which have defaulted.
The Bounce Back Loan Scheme (BBLS) provides private sector lenders with a 100-per-cent state guarantee on low-interest loans to small companies. It has underwritten £38bn of credit to 1.3 million companies to date.
Vulnerable to abuse
Mr Morgan said: “The scheme is vulnerable to abuse by individuals and by participants in organised crime.”
In a formal notice of the BBB’s concerns about the BBLS, Mr Morgan said the imposition of a uniform 2.5pc interest rate for all Bounce Back Loans could reinforce the dominance of big banks because smaller competitors would be unable to compete.
Caroline Plumb, founder of small business loans fintech Fluidly, said: “The lack of credit checks, liability and an unmatchable interest rate for businesses accessing the Bounce Back Loan Scheme essentially made it free money … personally, I wouldn’t have extended the deadline for applying for a BBLS loan without addressing eligibility criteria. It only compounds a well-intended but flawed solution.”
>See also: How to get a £30,000 grant for your London-based small business
Mr Morgan wrote that the better companies would be less likely to use the Future Fund, as they would already have found investors.
Covid expected to cost small businesses £69bn