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Is Covid borrowing killing business?

Journalist: Newspage Newsdesk

ended 12. August 2023

During the pandemic the government implemented several Covid lending schemes; bounceback loans, CBILS, recovery loans…

Businesses applied for this lending when rates were low. With rising rates, and repayments increasing, how has this affected your business?

Did you apply for Covid lending?

How much have your payments gone up?

How has this effected your business?

What should the government do to help?

3 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Like many businesses, we took out a 'Business Interruption Loan' from our bank to support us through the pandemic. What was a help is now a hindrance, with our repayments going up over £400 per month in the last year. Banks should have offered the option to fix rates at the time of application and the government should have supported this option. With businesses facing increased taxes, lower demand due to high inflation, and a generally stagnant economy there should be further help available to businesses who would have been able to afford the repayments at onset, but are now struggling. If we had chosen a non-Covid lending option, where we could have fixed our rate, our borrowing costs would be significantly lower today. The principle of the scheme was to help businesses and instead, it will end up strangling them.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
As Britain emerges from the Covid crisis, the once-heralded assistance is revealing unintended consequences. Disturbingly, one in 12 businesses has defaulted on Government-backed loans, with £414 million already disbursed to cover these bad debts. These figures, expected to rise, underscore the financial jeopardy faced by businesses that sought refuge in these loans. The initial allure of low rates during the pandemic masked the inherent reality that these rates were temporary. With interest rates now climbing, businesses find themselves grappling with higher repayments, threatening their financial stability. The repercussion of escalating repayments extends beyond balance sheets, constricting cash flow and stifling growth. Businesses, burdened by onerous repayment obligations, struggle to maintain daily operations, employee salaries, and strategic investments. The mounting challenge of debt repayment presents a stark reminder that the government should have thought this through.
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Austyn Johnson
Founder at Mortgages For Actors
Its hurting small businesses. I have had a client unable to remortgage due to a huge covid loan that is sucking his business dry now the interest is being paid. Borrowed £60k to keep the business running while the lockdowns stopped his trading, now being charged around £800 per month. Its not a big shop but it has staff to pay and he is classed as a sole trader, so the loan becomes his own liability.