Rishi Sunak considers 100% loans to small businesses as pressure mounts

Rishi Sunak is said to be considering rolling out 100 per cent loans to Britain’s smallest businesses as pressure mounts to provide meaningful support.

According to reports in the Financial Times colleagues of the chancellor say he is “weighing up” whether to go against his instincts and offer full state backing to loans of up to £25,000 to “micro-SMEs” struggling to get credit to see them through the coronavirus crisis.

Currently the government has pledged a guarantee of 80 per cent on loans but is only prepared to underwrite 60 per cent of the total loans made by any one lender under the scheme.

As we noted here, that means Sunak is asking the banks to take “nearly half of the risk on loans to companies whose prospects are intrinsically uncertain as they face the greatest economic meltdown of our times,” resulting in many institutions being unwilling to lend.

With many local businesses and constituents unable to get access to the CBILS I wrote to the Business Secretary Alok Sharma yesterday to urge the Government to introduce 100% backed loans for SMEs. 1/2 pic.twitter.com/lJ6i4621td
— Ruth Cadbury MP (@RuthCadbury) April 24, 2020

But following pressure from MPs and commentators, including the Bank of England governor Andrew Bailey and former Tory chancellor George Osborne, he may change course.

Senior bankers are reportedly working with the Treasury on a new scheme, which could be launched as early as next week, targeted at as many as 1 million of the smallest companies, typically employing a handful of workers.

Shop owners, hauliers and pub owners represent a mainstay of Tory support and Conservative MPs have been furiously lobbying Mr Sunak to speed up bank lending to local companies by offering full Treasury guarantees.