Originally written by Timothy Adler on Small Business
Lord Blackwell, chairman of Lloyds Banking Group, has suggested the government could end up owning equity in thousands of small businesses.
The Lloyds chairman thinks the government would be better off converting loans it is already guaranteeing into equity stakes in small businesses if loans go bad.
Banks and the government would need to work together to “think about how we transform some of that debt that they’ve accumulated into some other kind of security”, he said.
The Bounce Back Loans scheme, which launched on Monday, May 4, lent over £2bn to more than 69,000 small businesses within its first 24 hours.
The parallel Coronavirus Business Interruption Loan Scheme (CBILS) has lent £5.5bn to 33,812 businesses since its launch on March 23.
Lord Blackwell, 67, told an online seminar organised by City & Financial Global that debts could be converted into equity or an equity-type of security.
Viable businesses
Government and banks “do need to think about what will be required to recapitalise some of those businesses to ensure that they are viable going forward and otherwise viable businesses aren’t forced into insolvency or liquidation”, he said.
Devising a solution “needs working through urgently so that we can give businesses some