A Freedom of Information request to the British Business Bank by the U.K.’s only provider of personal guarantee insurance (PGI), Purbeck Personal Guarantee Insurance, to small business owners has revealed the current level of debt and arrears associated with the Bounce Back Loan Scheme (BBLS), The Coronavirus Business Interruption Loan Scheme (CBILS), and the Recovery Loan Scheme (RLS).
Purbeck’s analysis shows that over 145,000 BBL loans worth £3.8bn are in default as businesses continue to battle economic headwinds.
The findings come as latest estimates show that of £47 billion paid out in Bounceback Loans, £17 billion is already expected to be lost, £4.9 billion of that – over 10% of the loans – to fraud.
9% of Bounce Back Loans are currently in default, down fractionally from 12% in July 2022 with the average loan in default standing at £26,571.
While there are fewer CBILS loans in default – under 2% – this is a small rise on July last year when 1% of loans were in default. The average amount owed is £175k, from £164k in July 2022.
The analysis has also uncovered that businesses are typically borrowing £210k under the Recovery Loan Scheme which is open for applications until June 2024, and the average personal guarantee commitment made by business owners to secure a loan under the Scheme is £472k.
Bounce Back Loans default statistics:
- 29,087 loans in 30 days+ month arrears (£714 million)
- 115,916 loans in 90 days+ month arrears (£3.139 billion)
- Average loan that is in debt is £26,571
- There were 1,560,309 loans in total (£47.36 billion)
CBILS default statistics:
- 706 loans in 30 days+ month arrears (£124 million)
- 1,288 loan in 90 days+ month arrears (£226 million)
- Average loan that is in debt is £175,551
- There were 109,887 loans in total (£26.39 billion)
RLS loan statistics:
- 21,109 loans with a value of £4.450 billion. Average loan is £210k
- 1,992 loans supported by a personal guarantee, with a value of £940 million. Average personal guarantee backed RLS loan is £472k.
Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “The fractional reduction in BBLS debt levels and increase in CBILS defaults is not overly surprising given the economic environment. The lower level of defaults in CBILS can be attributed to the 80% Government Guarantee leaving 20% the responsibility of the business owner to pay back if the business fails.
At Purbeck, we saw many CBILS applicants take personal guarantee insurance to mitigate that risk. What is very clear is that the RLS has provided a solution to those businesses seeking bigger amounts of cash but again this comes with a risk in the form of a personal guarantee.
Most forms of business funding are now requiring personal guarantees from the owner/director to mitigate the risk. It’s why in the first quarter of this year more SME owners applied for personal guarantee insurance (PGI) to mitigate the risk of business failure, than at any time previously. The number of applications for PGI for business loans was up 93% year on year in Q1 2023.”
