193,000 companies in bounce back loan arrears

Almost 200,000 small businesses have fallen into arrears on their bounce-back loan repayments.

Data from the British Business Bank (request by Purbeck Personal Guarantee Insurance) found that the company administering the Bounce Back Loan Scheme (BBLS), shows that 193,000 firms had failed to meet their repayment terms at the end of June.

The figures represent about one in eight of the 1.5 million small businesses encouraged to take part in the scheme.

The arrears figures exceed the most up-to-date official number of 106,000 (as of September 2021).

The figures show that of those in arrears, 151,000 are behind by more than 90 days in making repayments, the timeframe which is normally considered the benchmark for being in serious financial distress. These firms owe an outstanding £4.5 billion.

Under the £47 billion BBLS, loans of between £2,000 and £50,000 were made from May 2020 to March 2021. The six-year loans at 2.5% interest were extended by the high street banks and other accredited lenders, but the risk of default stayed with the taxpayer.

Todd Davison, MD of Purbeck Personal Guarantee Insurance said “The ease with which business owners and directors were able to secure bounce back loans, with six years to pay off the debt, no personal guarantees and no fees may have come back to bite the UK government which is now facing the prospect of close to £5.5bn lost to the scheme in arrears, fees and interest. In contrast, accessing CBILS was more restrictive with lenders permitted to request personal guarantees on loans of £250,000 and over.”

“There is little doubt that personal guarantees will remain a core feature of any future loan scheme for small businesses from the UK government. Business owners looking to take advantage will need to be prepared and seek advice on how they can mitigate the risk, with insurance being an increasingly common option. Indeed, at Purbeck we have seen demand for PGI up 125% in Q2 2022 vs Q2 2021.