Businesses that have abused government coronavirus support or are poorly run will be exposed once the pandemic eases, ArchOver claims.
The peer-to-peer business lender said the government is currently focusing on businesses behaving well but that could soon change.
Will Haynes, borrower portfolio manager at ArchOver, said in a blog post that poorly-run firms shouldn’t be surprised if they have been rejected for government support such as coronavirus business interruption loans.
Read more: ArchOver rolls out open banking
“Inevitably, well run businesses who keep accurate management accounts, updated projections and practice transparent accounting have been rewarded,” he said.
“If Jo Bloggs has rinsed the company of cash through director’s loans, poor strategy and dodgy corporate governance, there’s a good chance SME Ltd will be on the end of a hiding once lockdown finishes, and it’s not the banks’ job to dole out the millions just because they can.”
He added that those misusing the furlough scheme could be targeted later.
“The scheme is totally open to abuse,” he said.
“Directors furloughing themselves, staff being forced to work despite being furloughed, companies delaying bringing back staff to maximise profit at the expense of staff who are effectively doubling up… it will be interesting to see if the government has the capacity to punish rule breakers.
“At the moment, the government is sticking to carrot and avoiding stick, evidenced by the recent announcement that the furlough scheme will be replaced with a one-off £1,000 reward for each worker retained for three months, regardless of whether their job is under threat or not.
“At times of crisis, the risk-reward balance becomes harder than ever to meet.
“Erring on the side of caution when it comes to handouts from the government might just stand businesses in good stead once the dust has settled in 2020.”