The British Business Bank has issued a response to a review by the National Audit Office Investigation into the Bounce Back Loan Scheme (BBLS).
The British Business Bank notes that the report highlights that the Bounce Back Loan scheme has succeeded in quickly supporting smaller businesses across the UK to access emergency finance, with more than 1.2 million businesses accessing loans so far, worth £38 billion. The scheme is one aspect of a broader policy approach to backstop the UK economy while the COVID-19 pandemic impacted economic growth and activity.
The BBLS seeks to provide financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID by providing loans of £50,000 or less. The loans have a 100% government-backed guarantee against both the initial capital and interest.
But the NAO report also states that the Bounce Back Loan Scheme faces a potential loss of £15 billion to £26 billion through businesses not being able to repay the loans and associated fraud. The NAO states “there remains a very high level of fraud risk.”
The UK government imposed a less strict eligibility criteria for the BBLS than other COVID-19 programs, according to the NAO. This was due to the goal of providing quick access to finance for smaller businesses. The NAO states that this lower level of checks presents credit risks as it increases the likelihood that loans are made to businesses that will not be able to repay them, leading to losses of taxpayers’ money.
The British Business Bank defends the program by explaining that, since launch, the fraud risks within the Scheme have been mitigated by accredited lenders undertaking standard fraud checks as part of the Scheme’s application process and for new business customers the Scheme insists lenders apply their standard Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
In addition, the Bank, along with the government, fraud prevention services, and the banking and alternative finance sectors have “acted swiftly post-Scheme launch to put in place additional measures” to further mitigate fraud risks.
The British Business Bank acknowledges that much hard work remains over the coming months and years to ensure that the risks to value for money are minimized.
The British Business Bank said that delivering the Bounce Back Loan Scheme continues to be a priority in providing emergency finance for smaller businesses during the current pandemic and benefiting the economy more widely.
The scheme will close for applications on 30 November 2020.