A Freedom of Information request to the British Business Bank by Purbeck Personal Guarantee Insurance, the U.K.’s only provider of personal guarantee insurance (PGI) to small business owners has uncovered the scale of debt and arrears associated with the Bounce Back Loan Scheme (BBLS). The findings have been revealed as the Financial Conduct Authorityi calls on lenders to treat SMEs fairly when recovering debts of up to £25,000 which fall under the consumer credit act. The data revealed by Purbeck shows that BBLS loans in arrears as of end of June 2022, all exceed this amount, with the average loan £29,357.
BBLS – 12.4% now in arrears:
As at 27th June 2022, 193,377 of BBLS are in some form of arrears. This makes up 12.4% of the total number of BBLS advanced.
In value terms, this equates to £5.7 billion of loans by capital outstanding (12.0%).
Notably, 151,587 (9.7%) are in 90+ days arrears with a loan on average of £29,660.
The outstanding capital is £4.5 billion.
The first 12 months of fees and interest were paid for by the UK Government. In total £984 million was paid for by the UK Government in respect of interest on BBLS facilities.
CBILS – average loan in arrears £164k:
As at 27th June 2022, 1,720 of CBILS are in some form of arrears (0.1%) of the total number of CBILS advanced. In value terms, this equates to £282 million of loans by capital outstanding (0.6%).
The average loan in arrears is £164k.
£1.4 billion was paid for by the UK Government in respect of interest on CBILS facilities. An additional £271 million was paid for by the UK Government in arrangement fees paid to lenders.
Recovery Loan Scheme (RLS) – 1 in 5 loans backed by a personal guarantee:
To date, £3.7 billion of RLS facilities have been agreed (18,371 by number) of which, £716 million are supported by Personal Guarantees as part of the security (19%). The average loan balance for Personal Guarantee supported facilities was £538,000 compared to the average loan balance across the scheme in totality of £201,333.
Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “The ease with which business owners and directors were able to secure bounce back loans, with six years to pay off the debt, no personal guarantees and no fees 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 contrast, accessing CBILS was more restrictive with lenders permitted to request personal guarantees on loans of £250,000 and over.
“There is little doubt that personal guarantees will remain a core feature of any future loan scheme for small businesses from the UK Government. Business owners looking to take advantage will need to be prepared and seek advice on how they can mitigate the risk, with insurance being an increasingly common option. Indeed, at Purbeck we have seen demand for PGI up 125% in Q2 2022 vs Q2 2021.