The Treasury is reportedly working with banking trade body UK Finance to develop a standard framework for dealing with bounce back loan scheme (BBLS) borrowers in difficulty.
The guidelines would create a standardised process for borrowers that find it difficult to make repayments, including offers of forbearance, according to the report in The Times.
BBLS, which provides loans of up to £50,000 backed by a 100 per cent government guarantee, is the largest government emergency loan scheme, delivering £38.02bn to 1.3 million businesses up to 20 September.
It’s been widely speculated that many businesses will struggle to repay bounce back loans with a report from the Recapitalisation Group, EY and lobby group TheCityUK forecasting that up to £36bn worth of government-backed business loans could become toxic by March of next year.
The government has already unveiled additional support for borrowers, including the option to extend government-backed loan terms from six to 10 years.
This followed peer-to-peer lending platforms calling for the restructure of BBLS to give businesses longer to repay loans.
More recently, it was revealed that the British Business Bank had written to the government prior to the launch of the scheme to air its concerns that a high risk of fraud could lead to a waste of taxpayer money.
Since then ministers have demanded answers from the government on what action it undertook to address the bank’s concerns.