Originally written by Timothy Adler on Small Business
Banks are warning that small businesses will never repay up to half of the Bounce Back Loans that have been taken out.
Moreover, when this happens, the Chancellor should prepare for the collapse of hundreds of thousands of small businesses.
Three senior bankers have warned that between 40 per cent and 50 per cent of the 608,000 borrowers who have taken out £18.5bn of Bounce Back Loans could eventually default on the debt.
Although the Government has said it will guarantee 100 per cent of the loans up to £50,000, it is still down to banks to pursue defaulters for the debt.
Executives say it would be logistically impossible to take hundreds and thousands of small, often family-run businesses to court, and that it would be a PR disaster for high street banks.
“Some arrangements will have to be made. A lot of them will be written off or converted into something else,” one bank chairman told the Financial Times. “In most cases the idea of the government taking equity in these companies is unrealistic — they are simply too small. So the question is what’s going to happen to all of these loans?”
RBS calls for bad loan