UK banks have been preparing themselves for the wave of small and medium-sized enterprises (SMEs) topping up with the Bounce Back Loan Scheme (BBLS) once the Chancellor reopens the coronavirus-related scheme on 9 November.
Banks have already lent £38 billion under this scheme, which is 100 per cent state-guaranteed.
Following England’s second lockdown, which started on 5 November 2020, Rishi Sunak had to extend the BBLS’ applications deadline from November to January and allow loans to be topped up.
According to NatWest, an estimate of a third of their existing BBLS customers, which is around 100,000 businesses, could be eligible for a top-up if their loan did not reach the maximum amount of £50,000 during their first time of borrowing. Plus, SMEs could also access this loan if they did not meet the 25 per cent revenue threshold.
NatWest, which taxpayers own more than 60 per cent, has lent £8 billion already for the BBLS.
Despite this being good news for SMEs, the National Audit Office has predicted that they estimate 60 per cent of these loans will not be repaid. Additionally, the BBLS, like most of these COVID-19 schemes, have encountered allegations of fraud.
Additionally, investigations into other coronavirus emergency loan schemes are piling up. According to the Sunday Times, the Coronavirus Business Interruption Loan Scheme (CBILS), which businesses can borrow up to £5 million from and the Treasury covers interests payments during the first year, has granted £17 billion worth of loans to 73,094 businesses.
High street larger banks can charge less than 6 per cent in annual interest on CBILS, while smaller banks who cannot borrow at the same low rate can charge up to 14.99 per cent in annual interest. Taxpayers cover the fees in the first year.
The Treasury has since recognised that loans were not the “right answer” for all businesses and suggested these organisations should look at deferred tax, the furlough scheme and grants for further support.
For more information or guidance on choosing the most suitable support for your business during this time, contact our expert team today.