Thread by @Gilesyb

Thread: less than a month since the Chancellor announced the creation of the Bounce Back Loan: cash from a bank up to £50k (capped at 25% of turnover), but with a 100% GOVERNMENT GUARANTEE.

Since then **£14bn** have been issued in just three weeks. Let's put that in context 1/

First compare to the normal flow: in all of 2018, according to @UKFtweets, there was £28bn of new lending to ALL SMEs - including the many that are far bigger to be serious users of the BBL 2/

Second, the stock: the total amount of lending to SMEs in 2018 was around £100bn (excl real estate). If you go back further to more detailed data from the old BBA bba.org.uk/news/statistic…
you find <40% of lending is to "small", which is <£1m turnover companies 3/

Thing is, BBLs are so generous that as @MartinSLewis explains moneysavingexpert.com/news/2020/05/s… you might as well use them to refinance yourself: "grab it even if you don't need it" 4/

And so perhaps the right comparison is not outstanding business debt: these micro companies are more like individuals with credit cards and mortgages than enterprises with banking facilities. 5/

But the fact remains: a set of companies with a total outstanding debt stock probably below £30bn has suddenly added about half to that, and the banking sector has a 100% state guarantee, and no commercial need to chase the debt hard. 6/

If this continues a few more weeks, we may even hit the point where more micro business lending has a government guarantee than does not. The big question for me: is debt this generously granted going to weigh on the entrepreneurs taking it, when recovery begins? 7/

or will it be written off? The cost of chasing <£50k loans is quite a high proportion of the amount. Can you imagine the banking sector having the capacity to chase so many exposures - and with no commercial skin in the game?

it's a cliche, but this is new territory /end

If anyone is interested, I have found the default rate profile for the early EFG and SFLG which were like CBILS back in the day ....

Though back then, they "only" had a financial crisis to think about ...
assets.publishing.service.gov.uk/government/upl…