With £ 79.3 billion borrowed through government loan programs, many companies are now expected to start paying down debt, but many are struggling, writes Michael Moore of Complete Commercial Finance.
2020 has been a tumultuous year for UK businesses with the biggest disruption since the war, and for many, the government’s loan programs have brought welcome relief in a time of real crisis. According to the British Business Bank, £ 79.3 billion has been loaned through government-backed programs since the start of the pandemic.
Yet 12 months later, for many, it’s time to start paying off their loan when business is back to normal. My co-director Karl Lanham previously wrote in the Lynn News about the considerations for paying off a business rebound loan (BBL), and if you missed the article you can see it on our website, ccf.finance.
Many companies have decided to keep the cash reserve provided by BBL, making monthly repayments, and with the benefits of a low interest unsecured loan, this is a well thought out decision.
However, a recent survey of more than 1,000 SMEs found that two-thirds of those polled say they will have trouble repaying their loans and that around 2.3 million businesses expect to default. Interestingly, while eight percent have yet to start repaying, 17 percent of SMEs that have taken out a loan have taken repayment leave – perhaps pushing decisions further – and the most worried about paying off their debt are the independent traders.
Business finance can be one of the most valuable tools a business can use to grow. As any owner will tell you, winning a contract is just the starting point and maintaining good cash flow can be an almost constant act of juggling. Typically, however, lenders will test affordability before offering financing and – naturally at the height of the pandemic – the government’s BBL program did not require such measures to be in place.
Arguably some of the companies that say they are unable to repay their BBL were still destined not to survive and the schemes only prolonged an inevitable result.
I would always advise anyone who is struggling to meet their business financial obligations to contact their lender as soon as possible. They will give advice and explain options that, together with your accountant, can be incorporated into a long-term repayment plan.
In truth, most businesses have their ups and downs in trading. In today’s “hot” economy, many local businesses face challenges of accelerated growth, including inventory management, staffing, and meeting demand, putting further pressure on cash flow. .
Other forms of loan can solve some of these problems and I urge anyone struggling with financing their business to seek advice rather than wait and see. By acting now, more businesses will be able to overcome the situation and be successful on the other side.
For more information contact Michael Moore at Complete Commercial Finance on 01553 611619 or visit ccf.finance