Target Group has warned lenders they need to act now on issues arising from the Bounce Back Loan Scheme (BBLS).

With repayments beginning and interest set to accrue begin from 4 May 2021, Target says time is running out for lenders to respond appropriately to the significant and unique challenges posed by the scheme.

The business processing and software firm said that BBLS has already placed a huge operational strain on the 28 lenders charged with getting it on its feet and the money out to 1.3 million businesses that have borrowed £40.2bn so far. However, current estimates are that up to 60% of BBLS loans may never be repaid, potentially costing the taxpayer £26bn.

While the government has said that it will underwrite those loans, Target says there will be high expectations and scrutiny on lenders when it comes to managing the process around those bad debts. That scrutiny is only likely to intensify the closer we get to the May 2021 deadline and as the pressures of the pandemic begin to ease and the scale of those potential losses become apparent.

Mark Gilliver, business development director at Target Group, said: “Lenders have been put in a difficult position by the BBLS. There is no doubt it’s important that the industry plays its part in helping to support UK businesses at this crucial time. However, the estimated losses in bad debts are stratospheric.

“A combination of legitimate business failures, fraud and organised crime is likely to leave the UK taxpayer picking up a hefty bill, and so the pressure will be on those lenders involved to show they are doing all they can to recover lost money and minimise those losses.

“It’s not difficult to envisage this £26bn issue becoming an intensely hot political potato in the coming months, with government and lenders potentially at loggerheads around where responsibilities start and end. Therefore, it’s crucial that lenders act now and ensure they have their ducks in a row when it comes to credit collections and other crucial operational processes.”