Small businesses are concerned that they will struggle to repay their Covid-19 loans, as government support has dried up, despite needing further aid.
One-third of small businesses are now worried they will be unable to pay back their Covid loans.
Despite support from the government winding up and furlough recently ending, research has shown that firms are still struggling. Earlier this year, EY carried out a survey with 712 businesses, which revealed that 51 per cent of businesses regard recovering from the pandemic as their main challenge. This is indicative that many small businesses still require support.
Anita Kimber, who is a UK financial services partner at EY, has said: “Businesses of all sizes have been impacted by the pandemic, but SMEs have disproportionately suffered, with large numbers relying on financial support just to survive.”
“At this important juncture, it’s critical that all financial services providers continue to do everything they can to support SMEs through the recovery effort and beyond, offering personalised recovery planning and seizing the opportunity to get a deeper understanding of these businesses.”
Throughout the pandemic, around one in nine businesses received financial support from financial institutions and the government. After three lockdowns and times of so much uncertainty, four-fifths of UK SMEs believe they have been detrimentally affected by the pandemic:
- 61 per cent state their supply chain was compromised
- 58 per cent reported a decline in revenue and profit margin
- 57 per cent saw a drop in sales volumes
Banks have given out £80bn in loans guaranteed by the government to 1.56m firms, alongside providing extensions to working capital, overdrafts, and capital repayment holidays.
Now all emergency support has stopped, MPs are now addressing struggles for businesses to get loans historically. Last month a £22m funding gap for smaller businesses was highlighted by MPs in the all-parliamentary group on fair business banking (APPG), partly due to lending drying up following the financial crisis. The group is asking the government to develop regional leaders, or community-developed finance institutions, in order to get loans around the country more effectively.
There have also been some issues, in regard to repayment and fraud from pandemic schemes. Lloyds has sent letters to recipients of Bounce Back Loans, demanding full repayment with interest within 14 days, if they suspect any information was “incorrect, inaccurate or misleading”. The bank has threatened to close accounts and cease banking services if the money isn’t received within a fortnight, according to The Times newspaper.
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