The number of small businesses in arrears after taking out a government-backed bounce back loan is now thought to be around 193,000, which is higher than previously claimed.
The new data comes after the state-run British Business Bank (BBB), which administers the loans, claimed the “overwhelming majority of businesses” were repaying the loans, with just 106,000 in arrears as of 30 September 2021.
However, a Freedom of Information (FOI) request to the BBB, seen by The Times, has revealed that as many as one in eight of the 1.5 million small businesses that took advantage of the bounce back loan scheme are in arrears.
It is not known how many of those failing to repay the loans are doing so due to genuine financial distress, or if it is down to the large-scale fraud which has marred the loans in controversy.
The paper reports that 151,000 businesses are behind by more than 90 days in repaying the loan, the benchmark for being considered in serious financial distress. Collectively, they owe £4.5bn.
A BBB spokesperson told The Times: “Over 85 per cent of facilities provided across the three Covid loan schemes [bounce back; the coronavirus business interruption loan scheme known as CBILS; and a scheme for larger companies called CLBILS] have either been fully repaid or are meeting monthly payments as scheduled, as at end of March 2022.”
However, Treasury and Cabinet Office minister Lord Agnew of Oulton resigned in January having criticised the government over its handling of fraud cases linked to the state-backed coronavirus loan schemes.
The £47bn scheme saw six-year loans of between £2,000 and £50,000 issued to small businesses between May 2020 to March 2021, at 2.5 per cent interest.
Lenders were guaranteed to get their money back, but the risk of default remained with the taxpayer, not the borrower.
Repayments were due after the first 12 months, with some extended by another six months under the Help To Grow scheme. Estimates of how much may be lost due to fraud range between £4.9bn and £17bn.
Purbeck Personal Guarantee Insurance made the FOI request to the BBB. The firm’s managing director Todd Davison told The Times: “The ease with which business owners and directors were able to secure bounce back loans may have come back to bite the UK government, which is now facing the prospect of close to £5.5bn lost to the scheme in arrears, fees and interest.”
In April, members of parliament criticised the government for being complacent in recovering funds and missing opportunities to prevent fraud.