The owners of small and medium-sized businesses have more than £1.2bn of personal liabilities linked to emergency coronavirus loans, according to reports.

An article by The Times suggested that SMEs are putting their personal assets on the line if their company does not survive the pandemic.

Personal guarantees make business owners personally liable for debts taken on by their firm. However, despite restrictions on the use of personal guarantees from the government’s COVID-19 lending schemes, a recent Freedom of Information (FOI) request showed that 1,587 directors agreed to them when taking on credit through the Coronavirus Business Interruption Loan (CBIL) Scheme.

Conister, which is part of AIM listed Manx Financial Group, suggested that the figure of £1.2bn in personal liabilities could be even higher.

“The push to move the liability to a government backed indemnity represents an improvement in the lender’s credit position, however, it must be noted that the SME was fully underwritten by the funder for a CBIL in the first place, so should theoretically be responsible,” commented Conister director, Douglas Grant.

“If the position is designed to take the director out of their liability then that’s a win win for everyone except the government. There is only so much that can be done by the government and we must avoid amplifying the zombie status of many UK SMEs, living off an ever-increasing debt pile, at all costs.”

Grant suggested that the long-term future of the UK’s business sector is “fundamentally reliant” on people and resilience.
 
“Business has always been about people buying from other people,” he added. “We must ensure that principally the financial security of individuals is protected so that they can continue to conduct business with each other.

“While businesses across the country have shown extraordinary levels of adaptability and strength in the face of changing consumer behaviour, we must also appreciate that we are now beyond the survival stage.”

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