Peer-to-peer lending platforms have called for the coronavirus business interruption loan scheme (CBILS) and bounce back loan scheme (BBLS) to be restructured.
Last month, a report from the Recapitalisation Group, EY and lobby group TheCityUK found that up to £36bn worth of government-backed business loans could become toxic by March of next year.
Lee Birkett, founder of JustUs, said that he therefore expects a restructure of the schemes to give businesses longer to pay back the loans.
He said the government should create a scheme similar to that of student finance. Graduates only start repaying their student finance loans once they start earning above a certain threshold.
Birkett said that businesses should only start paying back their CBILS or BBLS loans when they have started to make excess profit.
“It’d be like subordinated debt, businesses will only pay back when they can,” he said.
“I also expect a turbo-charged version of the future fund to enable fast growth businesses to access capital.”
David Bradley-Ward, chief executive of asset-backed lender Ablrate, agreed that CBILS and BBLS need to be restructured to give borrowers more time to repay them.
However, he said the government should convert bounce back loans into grants as a student loan-style repayment scheme would not be feasible.
“The government wouldn’t be able to take banks to court over bounce back loans because it would be a nightmare for them with stories of people going bankrupt,” said Bradley-Ward.
“And something similar to the way student finance works wouldn’t work with businesses as many people would just set up new companies to keep turnover down, and the costs of managing it would be utter chaos.
“It was necessary to think of CBILS quickly, but the unintended consequences will be there for years to come.”
Earlier this week, P2P lending platforms called for an extension to CBILS. The scheme is due to end on 30 September.