The U.K. government is seeking an agreement with financial institutions (FIs) to forgo the need for small businesses to offer personal guarantees to get coronavirus loans, the Financial Times reported.
Some small- to medium-sized businesses (SMBs) have noted they were asked to provide the guarantees, which could cause the loss of property like savings.
Chancellor Rishi Sunak vowed to provide interest-free loans as high as 5 million pounds ($6.2 million) to businesses that have under 45 million pounds ($55.8 million) in revenue to aid their survival amid the COVID-19 crisis, as the government guarantees banks for as much as 80 percent of a loan’s value.
Government officials expect the approximately 40 lenders who asked to become part of the program get rid of the personal guarantee demand. Many of the larger FIs in Britain have agreed not to ask for personal guarantees with the Coronavirus Business Interruption Loan Scheme (CBILS) after broad concern regarding the risks for business owners.
Lloyds Banking Group and Royal Bank of Scotland said they will not ask for personal guarantees for companies impacted by the outbreak even if they were not seeking loans with the plan. In addition, RBS said to would lower the minimum size of loans for inclusion in the plan to 5,000 pounds ($6,200) from 25,000 pounds ($31,000) to provide more sole traders and small businesses with access to CBILS.
Last month, a U.K. bar owner had asked his bank about the government coronavirus loan plan but was presented with a different kind of offering instead. The owner said, “We got offered a financial product of theirs, another loan which is not part of the coronavirus package.”
The bar owner noted he was asked to borrow against his home and questioned the request’s rationale with the current uncertain situation. U.K. Finance CEO Stephen Jones had recommended that the owner connect with the British Business Bank (BBB) to find another lender.