Born after CBILS – The original government Covid business loan scheme was the Covid Business Interruption Loan Scheme (CBILS). This was quickly deemed to be too clunky, too slow and borrowers often had to put up personal guarantees to get their cash. It was early May 2020, the UK was entering it’s 6^th week of national lock down and businesses were starting to really struggle. The Bounce Back Loan (BBL) scheme launched with the ability to get up £50k out to businesses within 24-48 hours. Fast, cheap loans – just what SMEs needed. However the scheme was cooked up so quickly that in hindsight it might have been too easy to get hold of the cash.

What checks on applicants then? The government agency running it – the British Business Bank – were explicit to the banks that they were not to use credit checks. Applicants had to confirm that they had been impacted by Covid, based in the UK, in business at 1 March 2020, and not insolvent on 1 December 2019. That was it – and borrowers were able to self-certify these points. One of the banks has since said ‘it wasn’t exactly a suitcase of cash left in a car park, but it wasn’t far off’.

The BBL scheme handed out £47bn to businesses over the next 15 months. With the reduction in the level of scrutiny, organised crime took advantage of this. One gang from Russia have been jailed for laundering over £10m of BBL money, one unnamed British bank lent them £3.2m in BB Loans.

It’s been estimated that between £3.5bn and £4.9bn of these loans were fraudulent. Although the latest figures are hopeful that the final tally may come in well below this. The quick application process and the ease of access has since come in for criticism.

Who’s paying for this then? Because of the inherent risks in the scheme, and the lack of credit checks done, the government pledged to repay 100% of the loans which went bad. It’s reported that banks have claimed for up to £1bn so far, with about £70m actually paid out. The British Business Bank is still working through these claims. So there’s still a lot to unfold on this saga, and we are a long way off knowing the end cost to the UK taxpayer.

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