Rishi Sunak considering 100 per cent guarantees on smallest business loans

Rishi Sunak is said to be preparing to offer 100 per cent guarantees on loans to Britain’s smallest businesses after pressure from Conservative lawmakers and the Bank of England.

The chancellor was "weighing up" whether to offer full state backing to loans of up to £25,000 for as many as one million small firms, typically with a handful of staff, to help them survive the coronavirus crisis, the Financial Times said.

A finance ministry spokesman declined to comment.

Sunak had said on Tuesday that he was still "not persuaded" that the government should offer a 100 per cent guarantee to banks which lend to small businesses hit by the pandemic.

But the FT said a new loans programme could be launched alongside Britain's emergency £330-billion scheme offering loans of up to £5 million, with state guarantees of 80 per cent, to small and medium-sized companies.

That programme got off to a slow start with many companies saying they were struggling to get banks to approve their loans.

Data published on Thursday (23) showed banks had provided £2.8 billion in loans, almost doubling from a week earlier.

Last week, Bank of England Governor Andrew Bailey urged banks to speed up their handling of applications and suggested 100 per cent state guarantees for the smallest loans might break a backlog in applications.

The Confederation of British Industry urged the government n Thursday to relax lending terms for government-backed loans to smaller businesses to stop them going bust.

The CBI also said loans should be repayable over 10 years, rather than a maximum six, for businesses that face high fixed costs and low profit margins.