The government has been urged to support lenders that have significant segments of their small- and medium-sized enterprise (SME) customers with loans in arrears.
Insurance firm Purbeck Personal Guarantee Insurance said that a separate vehicle could be considered to securitise these non-performing loans while proactive management of loan repayments by forbearance specialists would help preserve business and livelihoods.
The company, which provides personal guarantee insurance, said this would help ensure that lenders facing significant levels of non-performing loans have the credit risk appetite and human resource required to support funding lines for new customers.
The firm also recommended that the successor scheme to the coronavirus business interruption loan scheme (CBILS), could have a government-backed portfolio guarantee up to a certain quota, similar to the ENABLE guarantee, to incentivise responsible lending.
Purbeck Personal Guarantee Insurance said the Pay as You Grow initiative for the bounce back loan scheme should be offered to CBILS borrowers and that start-up businesses need access to affordable finance to support their growth which will aid the overall recovery.
The insurance firm also said the government should end the furlough scheme on a monthly basis from 80 per cent at the end of April by 10 per cent each month until the end of August to help businesses through the second quarter.
“We know how indebted many SMEs have become during the pandemic and how much of a personal risk this is for thousands of business owners who have signed personal guarantees to get access to finance,” said Todd Davison, managing director of Purbeck Personal Guarantee Insurance.
“Our analysis from a freedom of information request has shown CBILS loans to the value of £1.22bn were advanced in 2020 with a personal guarantee in place as security for the lender and the average loan backed by a personal guarantee was £766,000.
“The measures we are suggesting could play an important part in getting SMEs and the wider economy back on its feet.”