Image: David Iliff
Image: David Iliff

Some banks have come under intense criticism after it was revealed they required business owners to guarantee their emergency Coronavirus loans with personal assets.

Although the borrower’s main home would not be under risk, they may still be required to guarantee the loans using shares, personal savings and second homes could be lost if the loan goes bad.

Coronavirus business interruption loans (CBILs) were set up by the government to provide small businesses with emergency funding to ensure their survival during the Coronavirus crisis. But many believe these sort of stipulations from major banks will stop business owners making use of them.

Barclays has indicated it will require a personal guarantee on any such loan, while HSBC says it will be needed on loans above £100,000. However, Royal Bank of Scotland and NatWest bucked the trend, confirming that loans will be issued without any personal guarantees.

The SME Alliance said: “Yet again, it is the banks and not businesses who will receive the funds to help SMEs”.

The head of SME Alliance, Andy Keats, said: “We would appreciate some clarity because, as things stand, the proposed loans mean the banks have no risk, the government has a small risk and businesses and their officers have 100% risk.

The All-Party Parliamentary Group on Fair Business Banking tweeted: “There is confusion about [coronavirus business interruption loan schemes]. Treasury must issue clear guidance on parameters and not allow security at ‘discretion of the lender’ to muddy the waters. Unprecedented times require emergency funding. Keep it simple, and no [personal guarantees].”

Kevin Hollinrake MP, a former business owner who chairs the group, said: “I asked the chief secretary to the Treasury [Steve Barclay] in the House of Commons – does the new scheme include personal guarantees and he said it was his understanding that it would not. Well it’s my understanding now that it will.

“It should not include [personal guarantees]. If it does, very few business owners are going to want to take it up. In normal business circumstances, you can’t expect banks to lend money without some sort of commitment. But these are unheralded times and unprecedented measures.”