There is some fascinating language in last night’s press release from HM Treasury that modifies the Coronavirus Business Interruption Loan (CBIL) Scheme. It says lenders are ‘banned from requesting personal guarantees on loans under £250,000’. Hmmm.
This is – to put it mildly – a bit disingenuous, though politically expedient, bank bashing, because it implies it was the banks which wanted borrowers from the CBIL emergency scheme to pledge their business premises and any assets (other than the primary residence) as security against the loan.
In fact, this demand for personal guarantees, which so alarmed the owners of small businesses desperate for the help, was actually stipulated by HM Treasury and its partner the British Business Bank: the original documentation for the scheme said the lending banks had to use their ‘normal lending criteria’.
And as the Treasury well knows, those normal lending criteria almost always include a request for a personal guarantee.
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