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Writer's pictureRobert Gourlay

Treasury considers 100% guarantee on 'micro-firm' loans


Chancellor Rishi Sunak said in March that UK-based small and medium-sized business could apply for interest-free loans to help them with Covid-19 related difficulties.

However, companies say they are still finding it difficult to get credit.


Bank of England governor Andrew Bailey has questioned whether the system is "too complicated".


News of the Treasury's possible change of heart was first reported by the Financial Times.


According to BBC business editor Simon Jack, eligibility for loans has not yet been decided - namely, how small does a business have to be to qualify for a loan for which the lender gets a 100% guarantee.

Our business editor says an announcement is expected next week, if not earlier.

As many as one million of the UK's smallest businesses, employing no more than 10 workers, could benefit from the new rules, analysts say.

These include shops and pubs, which have been forced to close under coronavirus lockdown measures.


Debt fears


Loans to larger businesses under the coronavirus business interruption loans scheme (CBILS) will continue to get 80% backing.

The CBILS provide loans of up to £5m for companies with a turnover of less than £45m.

However, many firms have complained that loans are coming through too slowly and that some banks have imposed tough criteria on granting credit.

Alison Rose, chief executive of Natwest Group (formerly known as RBS), said it had so far processed 7,000 loans and that "help was getting through".

She said the stumbling block for many firms was "taking on additional debt when the future is very uncertain".


"Some businesses can't take on additional debt. It's important not to load debt on to a firm which isn't able to pay that back," she told the BBC's Today programme.

However, Anne Boden, chief executive of digital challenger Starling Bank, told the programme that the scheme's underlying technology was delaying approval of loans.

"It's based on a very old-fashioned scheme that requires lots of admin and lots of process and it's still being implemented and it's not working very well in all cases," she said.


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