A third of small businesses worry that they won’t be able to repay their Covid loans.
With government support ending and vacation ending last week, research shows businesses are still struggling. A survey of 712 companies conducted earlier this year by EY shows that more than half of the companies (51 percent) that responded identified recovery from the pandemic as their biggest challenge, suggesting they may need further assistance .
Anita Kimber, a UK financial services partner at EY, said: “Businesses of all sizes are affected by the pandemic, but SMEs have suffered disproportionately and many depend on financial support to survive.”
“At this important point, it is critical that all financial services providers continue to do everything in their power to support SMEs in their recovery efforts and beyond, to offer personalized recovery planning and to take the opportunity to gain a deeper understanding of these businesses.”
Almost one in nine companies received financial support – from financial institutions and the government – during the pandemic. After three lockdowns and a lot of uncertainty, 81 percent of UK SMEs say they have been adversely affected by the COVID-19 pandemic:
- 61 percent say their supply chain has been compromised
- 58 percent recorded a decline in sales and profit margin
- 57 percent recorded a drop in sales
The banks have provided nearly £ 80 billion in government-guaranteed loans to 1.56 million companies, as well as working capital extensions, overdrafts and capital repayment vacations.
Now that the emergency aid is gone, MPs are looking at the struggles for businesses to get credit in the past. MPs from the All-Parliamentary Group on Fair Business Banking (APPG) highlighted a £ 22m funding gap for smaller businesses last month, in part because lending dried up after the financial crisis. The group urges the government to develop regional leaders or community-developed financial institutions to help obtain credit more effectively across the country.
Issues have also arisen in relation to repayment and pandemic plan fraud. Lloyds has sent letters to some bounce-back loan recipients demanding full repayment with interest within 14 days who suspect that information was “incorrect, inaccurate or misleading”. The bank threatened to close accounts and suspend banking services if it did not receive the money within that two-week period The times.
What if i can’t repay my bounce back loan?