Companies

BBLS defaults could cost treasury £27.9bn

A best case scenario will reportedly see £6.9m written off, while the median case and worst cases would see £18.6m and 27.9m written off respectively

Defaults on the Bounce Back Loans Scheme (BBLS) will reportedly cost the treasury up to £28bn.

According to Business Rescue Expert, a best case scenario will see £6.9m written off, while the median case and worst cases would see £18.6m and 27.9m written off respectively.

The scheme allowed eligible claimants to borrow between £2,000 and £50,000 in pandemic relief support, resulting in £46.53bn being shared to over 1.5 million claimants.

Many borrowers reportedly applied for the loan through accredited lenders with lower lending criteria, due to the loan risk being 100% guaranteed by the government.

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In turn, loans were provided on an unsecured basis without the need for additional security over property or assets, debentures, or personal guarantees from company directors.

Chris Horner, insolvency director at Business Rescue Expert, said: “In the first quarter of this year alone, over 42% of the liquidation cases we’ve handled had taken out a BBLS, and the average amount borrowed averaged £37,500 per company.  

“As the first loan payments for the BBLS come due, businesses will have to seriously look at their ability to pay and their calculations might have been affected by not being able to reopen earlier than this month at best.”

The figures also include loans that have been “topped-up” to £50,000, with an additional 101,666 of these top-ups approved by lenders worth roughly £910,000 in total. 

Horner added: “Businesses that have topped-up their initial BBLS loan will also find out that not only are they unable to defer these payments, but they’ll come out at the same time as their original loan repayments – an unwelcome and expensive surprise.”

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