Over £8bn in overdue bounce loans, new figures show
Businesses are either behind or in default on £8.4billion of government-backed Covid loans, according to new figures released on Monday.
New figures from the Department for Business, Energy and Industrial Strategy show a sharp rise in claims on the government guarantee of dozens of UK banks.
In July, the government had paid out £1.2bn to banks for defaulted loans by small businesses.
It has more than tripled from the £350m the Treasury was forced to cover under the Bounce Back loan scheme in March.
The banks are also asking the government to repay them an additional £2.6bn in loans, up 63% since March.
He said a further £1.4bn of loan takers defaulted on their repayments, down 26%. Many of those who defaulted in March were likely among those for whom banks are now demanding payment.
Meanwhile, businesses that borrowed a total of £3.2billion had fallen into arrears, the department revealed, the same amount as three months earlier.
The news comes nearly two and a half years since the Bounce Back Loan Scheme was launched at the start of the pandemic.
It was launched to funnel money to small businesses up and down the UK that had been forced out of business due to lockdowns.
Billions of dollars flew in the early days of the scheme and by the end £46.6bn had been loaned out. Businesses could borrow up to £50,000, or 25% of their turnover.
But the scheme has also raised concerns about fraud. Checks on companies that took out a rebound loan were minimal out of necessity – the money had to get to the companies as soon as possible.
The banks were told that if they could not recover the companies’ money, the government would step in to cover the lost money.
But fraud was also commonplace in the scheme. Lenders say they prevented £2.2bn of loans to fraudsters, but they suspect £1.1bn of loans still went to fraudsters.
“It is regrettable that some have made the decision to take advantage of this lifesaving intervention by defrauding the scheme for their own financial gain,” the ministry said.
“The government has always been clear that anyone who seeks to do so faces prosecution.”
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