Covid Loans Hit £35bn

Posted on Jun 10, 2020. by NTI

It has been reported that British businesses have borrowed nearly £35bn under the three emergency loan schemes, unsurprisingly demand has been highest for the 100% government backed “bounce back” loans which provide funds up to £50,000 with a total of £23.8bn being lent under this scheme alone up to 7 June.

The BBLS seems easier to apply for, with banks able to provide funds the same day the application is made. The BBLS scheme was the final scheme to be launched after criticisms were made towards lenders who were seen to be taking their time agreeing loans under CBILS, which is only 80% backed by the government.

CBILS, which loans up to £5m currently totals £9.6bn in loans and the Coronavirus Large Business Interruption Loan Scheme which loans up to £200m is up to £1,6bn in agreed loans.

Lenders have warned that some of the borrowing might prove unsustainable for some companies hit by lockdown, which seems obvious to us in the insolvency industry when business are taking loans and currently have limited or no income and debts continuing to accrue.

Britain’s budget watchdog has suggested that the government will take a £5bn hit in the current financial year from losses over the loan schemes, with further defaults likely in the future, with one finance industry group warning that the losses could be as substantial as a third of the loans being taken out. This is on top of the £19.6bn paid to furloughed employees and £7.5bn paid to self employed workers, the increase in benefits paid to those who have now been made redundant and the lack of tax income from the 8.9m workers currently on furlough.

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