Although entering into an Enterprise or Supplier Development loan contract is generally done with the best intentions, some loans issued will inevitably be defaulted on or, in the worst case, a Beneficiary will refuse to repay it. When giving a loan, an organisation has the full rights of recovery; however, this has to be clear in the terms and conditions. First and foremost, a loan must take the form of a debt instrument; thus, it must never be a grant disguised as a loan.
Any loan made with the intention of not receiving repayment of the capital amount is not a loan but a grant and must be claimed as such. Consequently, claiming a loan under Enterprise or Supplier Development instead of a grant may be deemed as a Fronting Practice.
Enterprise & Supplier Development Services are available to Members in assisting with developing sound Loan initiatives.