Search

Using data between 2009 and 2020, we provide a detailed description of the borrowers within the Enterprise Finance Guarantee (EFG) loan portfolio, analyse time to default and how it differs across lender types. For limited companies, we match additional financial and non-financial data from public and proprietary databases and profile the characteristics of EFG companies within the population of limited companies. Employing hazard models we find loans granted to unincorporated businesses by the medium-sized financial institutions are associated with a much lower hazard than those provided by smaller local lending institutions and not-for-profit agencies. Moreover, we find some evidence that loans to limited companies, issued by the big UK banking groups, have a significantly lower default than those from medium-sized financial institutions. Large banks screen out high-risk firms. We argue that smaller lenders are able to price the risks rejected by the larger banks, using a wider range of credit information. JEL codes: G01, G21, L52, D25 [ABSTRACT FROM AUTHOR]

The concept of the 'discouraged' borrower is well documented. In this paper, we consider whether smaller firms in the UK who have been previously rejected for bank loans have been scarred by the experience so badly that even in the presence of two exceptionally generous Covid-19 loan guarantee schemes, they still refuse to make an application. Furthermore, we also consider what happens when they do. As banks have either zero or minimal loss exposure, do they still maintain their normal strict lending protocols or do they relax their standards to fulfil the governments' objective of supporting struggling businesses through the crisis? Our findings show that 72% of previously rejected borrowers are reluctant to request loans. We find some evidence that previously scarred firms faced such severe liquidity problems that they relaxed their distrust of banks during the Covid-19 crisis. However, their share of the government-guaranteed loan portfolio was slightly lower suggesting that banks were treating each new loan application on its merits. Plain English Summary: The Covid-19 crisis hit smaller businesses so hard that even previously rejected borrowers were forced to apply for loans to keep them afloat. Previous loan rejections have not discouraged small businesses in the UK in applying for Covid-19 government-guaranteed loans. Banks have used the loan guarantee schemes to continue to supply loans to small business during the pandemic. Our paper analyses the important phenomenon of borrower scarring and discouragement, when potential debtors are self-excluded from the lending market because they have previous rejections or expect a negative bank response. We consider around 45,000 UK small businesses from 2018 to 2020. On the demand side, we find that the economic shock for small businesses during the pandemic dissipates the scarring effect. Specifically, we find that micro and small businesses had the highest loan demand in the first two quarters of the pandemic (from March 2020). On the supply side, we show that scarred borrowers were not routed onto Covid-19 government-guaranteed loan schemes. These findings show the importance of government-backed lending schemes for small businesses during crisis period. [ABSTRACT FROM AUTHOR]

The UK has had a commitment to loan guarantee schemes since 1981 when it introduced the Small Firms Loan Guarantee (SFLG) scheme to address access to debt finance issues for smaller firms. Over the last 40 years, its support has been unwavering, and in the Covid-19 crisis, it once again turned to loan guarantees as a means of supporting smaller firms through the crisis-induced slump in trading activities. Of its three core Covid-19 guarantee schemes, the Bounce Back Loan (BBL) scheme was the most numerous with 1,531,095 loans issued amounting to a total of £46.5bn in lending. The BBL scheme provided a 100% capital guarantee on loans between £2,000 and £50,000, and firms were allowed to borrow up to 25% of their trading income, with a fixed interest rate of 2.5% of which the first years interest was paid by the government to the lending bank. Our findings suggest that the government losses may range between £7bn and £12bn depending on the underlying assumptions; however, we estimate Covid-19 guarantee schemes may have protected 118,639 businesses and 1,117,849 jobs. Looking to the future, we suggest that a new loan guarantee is justified that more resembles the former SFLG than the restrictive Enterprise Finance Guarantee (EFG) as more than one million small businesses will be heavily indebted and unable to borrow to invest in future growth opportunities. This would support the 'levelling-up' agenda and help prevent a post-Covid-19 low investment–low growth scenario. [ABSTRACT FROM AUTHOR]

Public loan guarantee schemes have the aim of alleviating credit constraints on small businesses by providing a gilt-edged guarantee to the lender in the event of default. In return, an interest premium is levied on loans and is paid to the government over and above that charged by the lending bank. Yet public guaranteed lending also attracts additional arrangement fees for the lender. This feature of such schemes has not been well understood despite the fact that on the current UK scheme 88.8% of issued loans and credit lines attract arrangement fees that average £2,935 per lending contract (or 2.9% of total borrowing) across the portfolio. In this paper, we explore the incidence and scale of arrangement fees and how they differ across different types of small business and lending types (credit lines versus term loans) to try and understand why fees are such an important and revealing feature of loan contracting. An important finding is that fees and interest rate are negatively correlated, implying that these two pricing elements of a loan may be compensating components of a loan’s pricing structure and contract menu offered to the borrower. [ABSTRACT FROM AUTHOR]

The article firstly focuses on the British colonial era in Cyprus, predominantly from the 1950s to the implementation of the Treaty of Guarantee. It argues that Britain played an active role in Greek-Turkish divisions, shown in particular by events between 1954 and 1958. The article then takes a legal analysis, focussing on the Treaty of Guarantee in 1960. It discusses British (and American) involvement in post-colonial Cyprus in the 1960s and 1970s, notably their support for a Turkish invasion. Crucially, it examines potential breaches of Public International Law through British actions, addressing both Treaty Law and Customary International Law. It is accepted amongst the international community that Turkey breached the Treaty of Guarantee when they invaded Cyprus in 1974. This is uncontroversial and will be briefly discussed, but the main intention of this article is to provide an original perspective on how the British also breached the Treaty of Guarantee. [ABSTRACT FROM AUTHOR]

The article focuses on the author's assessment of the impact of regional policy in Great Britain on the geographical distribution of employment and unemployment. On August 16, 1966, British Local Employment Acts were replaced by the Industrial Development Act, which abolished development districts and created five large development areas covering 55 percent of Great Britain. Regional policy in Great Britain therefore has now entered yet another phase of development. The major difficulty impeding an analysis of trends in employment and unemployment in the development districts as a whole is the fact that the number of districts did not remain constant over time. The scheduling of the new districts alone led to substantial changes in the total work force and numbers unemployed in the development districts, irrespective of regional policies to promote employment and reduce unemployment. Thus evidence of a falling rate of unemployment or an increase in the workforce in the development districts as a whole is no guarantee of the successful implementation of policy.

This study analyses the effect of formal guarantees of the British government on the performance of Turkish bonds issued in the second half of the nineteenth century. We compare the yields and prices of 11 bonds issued by the Ottoman government with different guarantees attached to each bond. Our findings indicate that the formal guarantee of the British government was significant in determining the prices and yields of Ottoman bonds. Even though the British guarantee had no effect on Ottoman institutions, practices, and fiscal fundamentals, the yields on the guaranteed loan did not move together with other Ottoman loans. [ABSTRACT FROM AUTHOR]

The article discusses undue influence and misrepresentation in relation to the grounds needed to set aside a guarantee under British law as of June 2012. Several legal cases are examined, including the Great Britain House of Lords' ruling in the 2001 case Royal Bank of Scotland v. Etridge (No. 2) which deals with a married couple and an alleged misrepresentation of the amount of secured debt.

The article discusses landlord and tenant law in Great Britain as of July 2012, focusing on the elements of enforceable and valid guarantees of tenant obligations under the nation's laws, as well as the importance of surety covenants in leasehold transactions. An implied release from a landlord and tenant contract is examined in light of the Court of Appeal's ruling in the case Holme v. Brunskill is provided.

This article examines the rules and principles of English law surrounding the construction and operation of material adverse change and material adverse effect provisions, with a particular focus on financing transactions. Such clauses raise a number of interesting issues of contract law and contractual interpretation; one of the key issues being the meaning and scope of "material". It is argued that materiality ought to be interpreted in the context of the particular agreement and the transaction as a whole, without ignoring the remedial consequences that are to be triggered by the relevant provision. Numerous other issues that arise for consideration in relation to material adverse change and material adverse effect clauses are also critically examined. [ABSTRACT FROM AUTHOR]

The article discusses the creation of community interest company (CIC) in Great Britain. It explores the CIC test which is met when a reasonable person considers the activities being upheld are for the benefit of the community as the community interest is an international concept. It mentions the Companies House, the government registry in the island where it registers companies and converts an existing company into a CIC through a process called transmogrification. Moreover, it states that ensuring the balance between the interests of the community and the interests of investors is one key thing about CIC. It adds that there are two types of companies under English law, one is limited by shares and the other is limited by guarantee.

The article discusses issues concerning constitutional guarantees in Great Britain. It states that a constitutional guarantee protects basic or fundamental rights against intrusion or subversion by the State and in some sense, entrenched by the legal mechanisms which are deployed to change ordinary laws. According to the author, he considers constitutional guarantees a good thing if it can be done while preserving historic constitutional arrangements.

Presents litigation issues on performance bonds and guarantees in construction and engineering industry in Great Britain. Importance of the clarity in the legal principle on construction players; Identification disputed issues and relevant case law; Interpretation and construction of the case law; Development of suretyship.

The article discusses payment guarantees and on demand bonds in Great Britain as of October 2012, focusing on the 2012 England and Wales High Court's ruling in the case (1) Wuhan Guoyu Logistics Co. Ltd. (2) Yangzhou Guoyo Shipbuilding Co. Ltd. v. Emporiki Bank of Greece SA. The case reportedly involved an alleged guarantee of a second installment regarding the price for a vessel due under a shipbuilding contract.

The article focuses on the scope of duty of disclosure of a creditor to his surety and what is meant by manifestly incorrect in a conclusive evidence certificate in Great Britain. It highlights the background of a case where North Shore Ventures Ltd. has granted its first defendant, Anstead Holdings Inc. a dollar term loan facility in an aggregate amount of 50 million dollars. It also includes the views on the Chancellor about the issue.

The article discusses the characteristics of contracts of suretyship in Great Britain. It provides an overview of the case which involves the presumption against construing the payment obligations as a demand bond had not been rebutted. It offers information on the decision of the judge based on several factors pointed against the company under the guarantee being the nature of a demand bond.

Guarantees were once an essential part of the life insurance market, but this has changed across much of Europe, In the UK, the move away from guarantees has been prompted by a combination of consumer, adviser and regulatory behaviour. Consumers tend to feel that guarantees come with high costs, insurers find that guarantees offer lower returns and regulators want to ensure that the true nature and cost of the guarantee is disclosed. Consequently, whereas the primary and unique role of insurers was once to pool and spread risks to provide individuals with guarantees, insurers must now compete directly with other asset gathering financial services institutions.Pensions (2006) 12, 55–57. doi:10.1057/palgrave.pm.5950038 [ABSTRACT FROM AUTHOR]

The article offers information on the British court case "Finance Corp v. Punj Lloyd Ltd" regarding guarantees of loan agreements, including demands made under guarantees.

The article discusses the Great Britain High Court of Justice's ruling in the 2015 case Cadlock v. Dunn which deals with mortgage law, sureties rights, and a question about whether a bankruptcy trustee or a bankrupt party's wife are entitled to the bankrupt party's beneficial interest in a matrimonial home. The equity of exoneration legal doctrine is examined, along with joint tenancy, and the legal relationships between husbands and wives in Great Britain.

The article discusses the Great Britain High Court's determination in the 2015 case Ramsay v. Love that celebrity chef and television personality Gordon Ramsay, a guarantor, was legally bound by a personal guarantee in a commercial lease which was signed using a signature writing machine. The court determined that Ramsay's father-in-law had actual authority to operate the signature writing machine on Ramsay's behalf. Agents' powers and British property law are examined.

The article discusses the Great Britain Court of Appeal's ruling in the 2013 case Harvey v. Dunbar Assets PLC which deals with joint and several liability in relation to composite guarantees. In this case, the court determined that the Guarantee was subject to a condition that it would be signed by all four of the guarantors that were names as such in the deed. Remedies and British contracts law are examined, along with a legal case involving the James Graham & Co. (Timber) Ltd. firm.

The article discusses performance bonds, construction contracts, and the British Court of Appeal's ruling in the case Aviva Insurance Ltd. v. Hackney Empire Ltd. which deals with questions of liability under a bond. Extra-contractual payments, sureties, and contracting side agreements are also mentioned. The discharging of the liability of a surety is also mentioned.

The article presents two cases concerning the issue of double proof in suretyship in Great Britain, namely, In re Kaupthing Singer & Friedlander Ltd. (in administration), and the Interedil Srl (in liquidation) v. Fallimento Interedil Srl & Anor.

The article presents a court case wherein a lender is entitled to subrogation even though it had failed to register its charge in Great Britain. The court examined the facts affecting the conscience of the mortgagor to the justice of the position as between the lender and the party enriched. The court reviewed the case and ordered that the lender is entitled to be subrogated to the discharged charge.