NEARLY three in ten Bounce Back Loans have now been claimed on by lenders and paid out by the taxpayer but the borrowers — business owners — still owe the money.
Responding to the figures, experts said that while the phrase ‘100% government-backed’ was “legally accurate”, it was “behaviourally reckless”.
The latest repayment data, published by the British Business Bank on 4 September, shows the government guarantee has been settled on 29.1% of all Bounce Back Loans by number.
“Settled” means the loan went bad, the bank claimed on the government’s guarantee, and the government paid the bank.
However, what it does not mean is that the debt is gone. The release clearly states that “all businesses remain responsible for repaying their loans under the schemes and are fully liable for the debt before, as well as after, a claim is made on the guarantee”.
Put simply, despite the fact that the bank has been made whole, the borrower still owes every penny, and anything recovered from them in the future goes towards reducing what the taxpayer has paid out.
Across the three Covid loan schemes, £13.18 billion has now been paid to lenders under the guarantee, £12 billion of it on Bounce Back Loans. Of all Bounce Back facilities, 66.13% have been repaid in full or are being repaid on schedule.
A further 3.34% are in arrears, and lenders have flagged £1.88 billion of the £46.47 billion drawn as suspected fraud.
Experts who responded to Newspage said the phrase “100% government-backed” used to promote the loans during the pandemic was accurate but was always going to be heard as something else.
Nouran Moustafa, IFA at Roxton Wealth, said: “100% government-backed was legally accurate but behaviourally reckless. The terms said borrowers remained liable, so businesses had a duty to read them.
“But government cannot pretend the headline did not do the selling. These loans were launched during a national emergency through a simple form, without normal credit or affordability checks and largely on self-certification.
“If an adviser promoted something as ‘100% backed’ while the protection belonged to somebody else, they would face serious questions about whether that was fair, clear and not misleading. Why should government meet a lower standard?
“The guarantee protected the lender, not the borrower. Taxpayers have now paid lenders £13.18bn across the three schemes, including £12bn under BBLS [Bounce Back Loan Scheme], while the business remains liable.
“This is Britain’s headline-versus-detail problem: announce the attractive benefit loudly, leave the consequences to the quieter detail, then blame people for misunderstanding when the bill arrives.”
Tony Sanchez, Founder at Bridging Loan Directory, agreed with Moustafa: “The phrase ‘100% government-backed’ was accurate but dangerously easy to misunderstand.
“In the panic of 2020, many business owners may have heard reassurance without appreciating that the guarantee protected the bank, while their business remained responsible for every pound borrowed.
“That does not make the loan free money. Borrowers signed loan agreements and cannot fairly expect repayment to disappear because they misunderstood the headline.
“But government and lenders also had a responsibility to make the distinction impossible to miss, particularly when applications were being completed at emergency speed.
“Once a guarantee is settled, the liability has not vanished. Public money has compensated the lender and recovery from the business can continue. The scheme transferred the lender’s risk to the state — it did not transfer the borrower’s debt.”
Sarah Gatford, a Positive Psychology Practitioner who runs a Derby-based practice, said she continues to pay off her Bounce Back Loan and it is holding her business back — compounding the other pressures facing small and micro businesses in recent years.
She said: “In 2024, I was reported as saying my Bounce Back Loan was a millstone around my neck. Two years on, it’s still there. It was sold as a milestone, yet delivered as a millstone.
“I’m repaying, not reinvesting. A product is sitting finished on my shelf because I can’t afford to launch it. The headline is the £13.18 billion paid out to lenders, because it backed the bank, not the borrower.
“The story nobody tells is that two-thirds of us have repaid or are paying on schedule and have gone six years without the cash to grow. We didn’t default, so we don’t get counted. Bounce Back was the name. The bounce is taking rather longer than advertised.”
