Well, what did you think would happen?

The Small Firms Loan Guarantee scheme underwrites 75% of loans to young businesses whose founders do not have enough assets to get traditional finance.

But Barclays is accused of lending £200,000 under the scheme to an established businessman whose net worth it had reckoned as being \”well over £20m\”. The bank is said to have hoped the loan would prop up Jeffrey Morris\’s business empire after becoming concerned that it might collapse.

If the government\’s handing out free money then of course stuff like this will happen.

And don\’t start bleating about how if it were a state owned bank then everything would be better. That would just bring politics into it: getting a loan would be a matter of supporting the right constituency party if the political control were local, the right national party if it were national.

Just look at what happened in Spain….

3 thoughts on “Well, what did you think would happen?”

  1. The default rate on these loans is very high – about 35% at the time of the Graham report. It would be unreasonable to censure banks for not making such loans at their own risk.

    The Guardian may be unaware that the SFLG has been replaced by the “Enterprise Finance Guarantee”, with somewhat different limits and guarantee arrangements.

  2. No matter the guarantee the bank is being asked to lend in a sector that has tended to have both successes and failures. I run my own business, always stuff I find I don’t know, always mistakes I find I can make.
    Bank did a review with me by phone a few months back – the girl on the other end did not seem to understand that profit and growth do not always go together, that turnover is not profit, and that if I suggest a figure I say is an estimate it should not be tripled to satisfy the bank.
    With such staff I have to wonder who exactly they lend to – I’d lose considerable money if I tried to meet conditions they wanted the business to have in order to be considered in the future for finance.

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