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In early 2020, the Government established three business loans schemes in response to the pandemic:

  • the Coronavirus Business Interruption Loans Scheme (CBILS)
  • the Coronavirus Larger Business Interruption Loans Scheme (CLBILS)
  • the Bounce Back Loans Scheme (BBLS).

The schemes were part of the Government’s package to support the economy through the pandemic. Their launch received wide political and business support.

The British Business Bank oversaw the schemes. A range of accredited lenders made decisions on applications made to them.

By 31 May 2021, the three schemes disbursed over £79 billion through loans and similar facilities. BBLS accounted for over 93% of loans made and almost 60% of funds disbursed.

The original CBILS was quickly modified in response to concerns about difficulty of access to and speed of funding. It already offered an 80% Government guarantee to lenders.

But the BBLS increased that guarantee to 100% and further simplified application processes. The scheme immediately proved to be particularly popular. Some accredited lenders sought to manage demand – for instance, by only accepting applications from existing customers. Others, such as challenger banks and fintech lenders, found it difficult to get hold of funds to lend to businesses.

To simplify the application process, the Government relaxed consumer protection provisions for BBLS. Although all the schemes relied on ‘know your customer’ and anti-fraud checks, there have been concerns that the schemes were open to abuse by fraudsters.

Most borrowers benefit from not having to repay anything for the first year. No interest would be charged over that period either.

The three schemes closed at the end of March 2021. They were replaced by the Recovery Loan Scheme in April 2021.

Many businesses have certainly survived with the help of the schemes. But many face an uncertain future. The Office for Budget Responsibility has suggested that up to 40% of BBLS borrowers may default. Given the Government guarantee, this could lead to losses of as much as £33.7 billion.

There has been some discussion about managing defaults and slow repayment. Proposals include setting up ‘bad bank’ structures or developing wider initiatives to allow businesses to pay off debts more slowly.

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