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British businesses do not intend to repay government loans

Loans fraud

Bounce Back loans offers to small businesses in trouble, up to £ 50,000 free interests for the first 12 months with an interest rate of 2.5% for the folllowing next years.

Considering the situation that push the government to create Bounce Back Loans, many business owners do not believe that they will be take into a justice court for payment default on these loans; while others thinks that they will have to face a bankruptcy situation in less than a year…

According to the Business Banking Resolution Service, almost half of the small businesses which subscribed to the emergency bounce back loans (43%) do not intend to repay their debt.

If previsions appears to be correct, the financial repercussions will be consequent for the United Kingdom..

What budgets for these programs?

The Coronavirus Business Interruption Loan Scheme (CBILS) program supports up to £ 5 million per businesses in the program and over £ 14 billion for Bounce Back loans.

Regarding these numbers, we can say that investment is consequent for the United Kingdom public treasury.

This leads to one question for HRMC and governments people.

How to solve the problem of potentials unpaid loans?

Firstly, it is essential to make companies of the program understand that, they will have to give back 100% of the money that they borrow.

However, the government could not sue thousands of companies in justice for state debts …

An idea to improve the situation could be to take equity of these companies as a refund.

Indeed, 37% of small business decision makers who get these loans said that they would consider swapping government’s debts for equity.

However, according to HRMC, the idea that the Treasury would become a shareholder of thousands of companies is unrealistic.

It was also suggests that loans guaranteed 100% by the government could be repayable for a longer period; such as a student loan.

This would make it easier for companies to repay their loans over time.

Another idea is also to turn these loans into a new type of debt, which a refund based on financial performance.

This would prevent small businesses to struggle against bankrupt after the 12-month interest-free period expired.

Some ideas are already emerging solve the problem…

But which one will be the most suitable ?

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