The government’s emergency business loans are proving a lifeline for small. But, now that the business sector is slowly reopening, thoughts are turning to repayments and how firms can afford to pay back the money they have borrowed.

New figures show that the government’s various emergency business loan schemes are helping hundreds of thousand stay afloat during the pandemic. According to the data, more than one million payments have been issued through the Bounce Back Loan Scheme, worth almost £31 billion.

In addition, the Coronavirus Interruption Loans Scheme has paid out almost £11.5 billion as part of over 53,500 loans, with small businesses accessing up to £50,000 to help them through the pandemic.

And the funding for small businesses doesn’t end here. The government has launched a new scheme, the £10 million Kick-starting Tourism Package, to support the tourist sector. Grants of up £5,000 will be available for small businesses in tourist destinations.

Ability of SMEs to repay government loans questioned

The government’s various initiatives have been critical in helping small businesses keep going but as these businesses gradually begin to restart, the focus is starting to turn to repayment and the ability of these firms to pay back the amounts that they borrowed.

Loans granted as part of the BBS and CBILS have a one-year repayment free period, with the first repayments scheduled for spring 2021, but given the condition of the market and the ongoing uncertainty that surrounds not only the pandemic but also Brexit, it is likely that many small businesses may struggle to begin repaying loans in little more than eight months time.

Notably, such is the concern about the ability of businesses to repay the government-backed loans, banks in the UK are reportedly drawing up a code of conduct for pursuing businesses that default on government-backed loans.

What is the solution to SMEs state loan repayment problems?

How the government manages the situation remains to be seen, but what is clear is that small businesses will need flexible repayment terms if they are to begin making payments and survive through 2021 and beyond.

Alternative finance can also help small businesses manage the burden of funding regrowth and repayment.

In the wake of prolonged caution from traditional lenders, alternative finance facilities such as invoice finance, asset finance, peer-to-peer lending and crowdfunding are proving a vital source of capital for small businesses, both for safeguarding cashflow and for essential investment. These facilities, which offer a more personalised approach to lending, are helping small businesses survive and grow.

Tellingly, alternative finance is playing a key role in the government’s Covid-19 business support strategy, in particular with regard to the Coronavirus Business Interruption Loan Scheme, which offers access to a range of finance facilities, including alternative finance services.

Accessing funding for repayment and regrowth critical for business survival

As the country cautiously moves out of lockdown and small businesses prepare for a further test of their mettle, the repayment of government-backed loans is an issue that is drawing attention. To help manage the costs of regrowth and repayment, business owners need to be aware of all the funding options available to them, including alternative finance.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.