UK banks fear that up to 800,000 businesses could go bust in the next year if they are unable to defer repayments on government-backed loans.
The lending industry is proposing a student loans-type scheme, where coronavirus loans can be converted into a tax debt repayable over a decade.
Like student loans, the money would only be repayable when and if the businesses can afford it.
Banks want the scheme to be administered by HM Revenue and Customs, BBC reported.
HMRC would have the operational horsepower, existing relationships with, and adequate knowledge of, companies to manage a programme of this scale.
Banking industry lobby group TheCityUK is proposing to set up a “UK Recovery Corporation”, through which companies could convert their short-term debts into a longer term financial obligation to HMRC and pay back the debt when they are making enough money – a so-called contingent tax obligation.
This, the banks argue, would be far simpler and faster to arrange and administer, than the UK government taking direct ownership stakes in hundreds of thousands of companies.