Whilst superficially attractive, the scheme is a chimera as banks still have a duty to ensure the loans can be repaid
So much for not being persuaded. After digging his heels in over the idea of providing 100pc loan guarantees for business, the Chancellor is now reportedly putting together a new rescue package for Britain’s smallest companies.
The scheme is expected to offer loans of up to £25,000 to so-called “micro-SMEs” that have the full backing of the Treasury. The idea is that this would turbo-charge credit to a vital corner of the economy that is currently struggling to get the financial support needed to make it through the crisis.
And who would argue with that? There are as many as five million SMEs in the UK, with an estimated 16.6 million employees. New research claims that a third of small businesses are so cash-strapped that they could be bust within a fortnight.
Still, the move is puzzling. For a start it was only three days ago that Rishi Sunak dismissed calls for 100pc guarantees on loans for coronavirus-hit businesses, saying he was unconvinced that it is “the right thing to do”.
Yet the Government is under intense pressure to ramp up the level of support it is providing amid widespread criticism over both the scale and speed of the execution of its bailout package. Business owners complain that the lending criteria are too tough, most of all the impossible task of proving future viability.