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Coronavirus FAQ

Are banks now willing to lend without security?

It appears that when first announcing the guarantee scheme the government assumed that no personal guarantees would be required - since to do so made the scheme largely pointless - whereas the banks assumed that there would be personal guarantees - since that is what they always want for small limited companies.

However, on loans up to £250,000 it is now explicit that there will be no personal guarantees and hence largely no security for the banks - beyond the 80% which the government is giving as a guarantee.

Above that amount the personal guarantee cannot be secured on your home.

In order to take out the loan the bank have to be satisfied that the loan makes good commercial sense and that they would have been prepared to lend the money, with conditions, even without the guarantee. On the other hand if they would have been willing to lend the money without the scheme then they cannot have the loan in the scheme. So the usual strategy would be to satisfy the bank that they would have lent you the money if you had been willing to give a personal guarantee backed by a security on a property. Then you make it clear that you are not willing to give them that guarantee.

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