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Old Mill director says Government should offer grants not loans

Mark Neath, director at Somerset business advisors Old Mill, believes the Government should be offering grants to business rather than ‘inappropriate lending’ through the new, so-called Bounceback Loans which are due to start next week.

Mr Neath said: “More Government support will obviously be welcomed by businesses but the fact that we are even having the debate about the guarantee level demonstrates that loans in some cases are not the right tool for the job.

“If a bank has assessed a business proposition and concluded that affordability is not sufficient to repay the loan, then the bank should not lend, and it would be the wrong thing for the business to borrow.

“Now the Treasury is going to provide a 100% default guarantee for certain loans doesn’t alter the underlying facts that the business looks unable to service the loan and that borrowing would be the wrong thing.  Even the Chancellor appears to acknowledge that loans are going to be made with little prospect of them being repaid.

“If that happened, such that the Government guarantee was more likely than not going to be called upon, then it begs the question why not simply give a grant and spare the banks and business owners a lot of work and ultimately stress and pain to end up at the same place?

“The media narrative I keep reading day after day is that banks’ lending criteria are denying loans to businesses. Perhaps the story ought to read: banks’ lending criteria protect businesses from inappropriate borrowing, what is the Government going to offer instead?  I fail to see how 100% guarantee is the answer.”

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