RBS offers business interruption loans without personal guarantees



The Royal Bank of Scotland has announced that it will not be insisting on personal guarantees to issue government-backed emergency loans to business owners, whilst banks across the UK face criticisms for implementing such procedures. 

Lenders across the country including Barclays and HSBC have been utilising such clauses, which place most of the risk if the loan goes bad, upon the business owner rather than on the banks, which have reduced exposure in any event thanks to government guarantees.

The personal guarantees would mean could pursue the personal property of the owner of a firm if their business collapses if they cannot afford to pay off the debt they owe.

Whilst the business owner’s main home would be protected, the bank could still go after other personal assets such as personal savings, shares or holiday homes.

Under the COVID-19 Business Interruption Loans (CBIL) scheme, the state will underwrite 80% of the risk of bank loans of up to £5 million. However, borrowers are liable for the entire debt, as the taxpayer guarantee is purely for the banks’ benefit, intended to give them confidence to lend to businesses that they may otherwise avoid.

It is believed that insistence on personal guarantees may stop business owners from utilising emergency loan schemes which the government has put in place to help firms during the COVID-19 crisis.

Business owners and MPS across the UK are outraged, saying that the tactics being used by banks to secure their money are not fair when the companies are only seeking out loans because of the emergency measures introduced by the government, The Times reports. 

However, as RBS has announced that it will offer business interruption loans without asking business owners for personal guarantees, other lenders will now be pressured to follow suit.

Kevin Hollinrake MP, a former business owner who chairs the All-Party Parliamentary Group on Fair Busines Banking, said: “I asked the chief secretary to the Treasury 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.”

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