Business owners put billions of pounds on the line to secure early CBILS loans, figures reveal

Business owners who took out an early coronavirus loan have more than £1.2 billion of personal guarantees on the line, a major study has revealed.

The figures, published by The Times, highlight the number of enterprises that used personal guarantees to secure Coronavirus Business Interruption Loans before restrictions were put into place.

Launched last year, the Coronavirus Business Interruption Loan Scheme (CBILS) initially required business owners to put forward personal guarantees to access finance. The rules were adjusted shortly after to restrict personal guarantees on loans of less than £250,000, but not before thousands of directors had already agreed to put personal assets – such as second homes – on the line.

The figures, obtained via a freedom of information request, reveal that 1,587 organisations agreed to put forward £1.2 billion worth of personal assets before receiving credit – making directors personally liable for the debt should the company go insolvent.

The data shows that the average size of a Coronavirus Business Interruption Loan backed by a personal guarantee is £766,000. This means that the average business owner could be personally liable to repay some £150,000, as 80 per cent of the loan is guaranteed by the taxpayer.

Commenting on the figures, experts have called on the Government to backdate the changes to protect business owners.

“Many borrowers would have agreed to the personal guarantee at a time when they thought that normal trading conditions would have resumed by the end of 2020”, said Nic Connor, a financier from Rangewell.

“Given this is now patently not the case, the government should consider offering something similar to the mortgage indemnity guarantees but tweaked to protect business owners.”

The CBILS, Future Fund, and Bounce Back Loans (BBL) scheme were recently extended until 31 March 2021 in response to the third national lockdown. The latest statistics show that the schemes have now delivered more than 1.4 million Government-guaranteed loans to businesses affected by Covid-19 disruption.

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Posted in Blog, COVID-19, COVID-19 - Grants, Loans, Reliefs & Deferrals, Covid-19- CBILS, SMEs.