The decision by the major high-street lenders to start the process of collecting Covid-19 loan repayments is set to heap pressure on already struggling small businesses. How can these firms manage the repayments?

While the move by the big banks has been signposted for some time, news that letters are starting to land on doormats will be hard to swallow for many small businesses. It is estimated that government schemes have handed out over £75 billion in emergency loans since the beginning of the pandemic.

Notably, the banks are taking this step only a matter of days after the launch of the Recovery Loan Scheme, which is aimed at helping firms access capital as the economy reopens, and ahead of the opening up of further assistance for self-employed workers through SEISS.

Taking Covid-19 loans and planning for repayments

Clearly, many small businesses still require emergency financial support – a recent study showed that a significant number of SMEs have had their ability to pay bills and wages seriously affected by the pandemic. As such, lenders such as Lloyds, Barclays, HSBC and NatWest are surely expecting a lot of businesses to want to defer payments, however the repayment letters read.

However, deferment will only be available for so long and the patience of lenders is likely to be just as temporary. Therefore, it is vital that small businesses are ready to manage the demand of repayments on their capital and cashflow. To do this, they need to be aware of all the finance options available to them, from the government’s scheme and high-street bank facilities to the services of alternative lenders.

Covid-19 loan repayment and alternative finance help

With regard to alternative finance, in the wake of prolonged caution from traditional lenders, which is an issue that has returned during the coronavirus pandemic, alternative finance facilities such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target recovery and regrowth.

Notably, alternative lending is playing a prominent role in the government’s new headline emergency support scheme, the Recovery Loan Scheme. Invoice finance and asset finance between £1,000 and £10 million per business are available under the initiative. This profile is helping cement the reputation of alternative finance in the business sector.

Repaying Covid-19 loans and SME finance services

Starting the Covid-19 loan repayment process was always going to be a sensitive task and news that it has begun will surely elicit strong reactions. Nevertheless, small businesses with these loans have to put financial planning in place for repayment. To manage the impact on cashflow, it is vital that firms are aware of all the finance services available to them.

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