Should we be worried about the CBILS?

Today, 7th October 2020, the National Audit Office issued a report into the Bounce Back Loan Scheme, whereby Government guarantees of 100% of loan value were given to accredited lenders who provided loans from £2k to £50k to businesses.

Anecdotally there have been stories doing the rounds of businesses applying for loans either fraudulently or with such weak financials they would never normally pass any form of credit process; so it was always likely fraud and delinquency levels would be materially higher than those to be expected in a non-Covid environment.

The preliminary central estimate in the NAO’s report is that 35% to 60% of borrowers may default but does qualify this remark adding that the estimate is ‘highly uncertain’.

If the actual figure is anywhere close to this estimate then its deeply troubling for two reasons, firstly it will add to the overall economic impact of the virus and secondly, from a human behaviour perspective, it means that a lot of people have deliberately and maliciously set out to exploit this pandemic to satisfy their own avarice.

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