Banks criticised for insisting on guarantees before issuing emergency loans
Banks have been criticised by firms and MPs for insisting on personal guarantees before issuing the government backed emergency loans, as reported by the BBC.
However, the business is more at risk than the bank if they cannot repay the loan as the lender may take a businesses’ personal property.
An individual’s home would be protected, but a bank may take a businesses’ other assets, such as personal savings, shares and holiday homes.
The government has put the scheme in place to help prevent businesses from going under amid the coronavirus pandemic.
Despite the coronavirus business interruption loans existence, many believe it will not be utilised due to the banks being able to repose the majority of a businesses’ assets.
Barclays have told its customers that they will be required to sign personal guarantees in order to access the loan type.
According to the BBC, HSBC has said it will require a form of personal guarantee for loans over £100,000.
In contrast, Royal Bank of Scotland has confirmed it will offer business interruption loans without asking business owners for personal guarantees.
The scheme should offer loans of up to £5m, where the government promises to cover 80% of losses if the money is not repaid, according to UK Finance.