26th March 2020

Why should founders foot a lifetime bill for Covid-19?

Banks criticised for loan scheme tactics after requiring personal guarantees from business owners

Leading SME investment provider – IW Capital – discusses the scheme and why many will be put off by personal liability


Hi Simon,

 I hope you’re well and that this is of interest.

This week the first wave of Coronavirus Business Interruption Loans have been made available for firms in the UK, allowing them to claim up to £5 million in business loans to help cope with the strict measures put in place during the coronavirus pandemic. 

However, despite guarantees that the government will provide lenders with a guarantee of 80 per cent of each loan, the ultimate responsibility for the debt rests solely on the small business borrower. 

Now, some banks are being criticised for insisting business owners and entrepreneurs provide personal guarantees for the loans should the business fail due to the coronavirus lockdown.

To be eligible for a facility under CIBLS, your business must:

  • Be UK-based in its business activity with an annual turnover of no more than £45 million
  • Have a borrowing proposal which - were it not for the COVID-19 pandemic -would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty

Luke Davis – CEO of SME finance provider IW Capital – discusses the impact this will have on borrowing and business survival:

“The Business Interruption Loan Scheme will offer a crucial lifeline for many SMEs across the UK, but there will be large number who are concerned by having to guarantee the loan personally. This is one of the few economic eras in which a business owner could be doing everything right and still not be successful, due to some unforeseen circumstance that comes about due to what the Chancellor has called these “unprecedented times”. 

This may mean that business owners who are desperate to keep their business afloat and keep their staff employed will have to make difficult decisions as to the risk of being personally exposed to large amounts of debt that, while interest free for 12 months, are by no means always easy to repay for small firms and their owners. The full effect of this downturn and lending facility may not be visible until two, three or four years down the line when businesses and founders are struggling to pay off debts that are no longer interest free.

This is an incredibly difficult time for people across the UK both personally and economically. There is a significant threat to the UK’s business community – especially to the small firms which make up the backbone of our economy. Government support has been extensive and wide reaching up to this point – with more to come by all accounts. It is, however, key that the private sector and private investors do not retreat in what is a vital period.”


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