At the end of March this year when the Bounce Back Loan Scheme ended, 1.5m businesses had borrowed £46.5bn under the scheme. Loan numbers are fairly evenly spread across the UK and the average value of loans is also consistent. Average loan values are highest in London, at £33,369, and lowest in Wales at £27,677.
However, sector-by-sector analysis tells a different story, with wholesale and retail trade, repair of motor vehicles and motorcycles, and the real estate sector borrowing in proportionately higher numbers and larger loan amounts of just over £35,000.
As different sectors and businesses shed restrictions and start to recover at different rates, businesses may have difficult cashflow management decisions to make. This can be a stressful time, especially if businesses, as well as the individuals running them, are in a more vulnerable position than they have previously experienced due to the pandemic. ICAEW has produced a helpsheet on BBLS repayments which provides further guidance.
One key decision will be whether to take advantage of the Pay As You Grow (PAYG) options announced last year, which allow firms to extend their loan terms, reduce repayments or take a repayment holiday.
Many banks have highlighted PAYG options to their customers in advance: for example Barclays Bank, which has lent to 340,000 businesses under the scheme (more than a fifth of total borrowers), wrote to all customers three months ahead of their first repayment date, and each of the subsequent months following, and has used a variety of channels to highlight the fact that timely action extends their range of options.
While PAYG options are available at any time, it’s important businesses understand the time needed to apply for them. Abdul Qureshi, Managing Director, Head of Products, Barclays Bank told ICAEW Insights: “We understand that times are hard for many small businesses and, as we are approaching the time when many businesses are also due to start repaying their Bounce Back Loans, we want to ensure they are aware of the range of choices available to them to help either defer or flexibly manage their payments. We are strongly encouraging our customers to review their options under the scheme as soon as they become available to them, as Barclays customers will need to apply for a PAYG option 20 days before their next payment date for it to come into effect.”
As well as businesses themselves needing to plan and manage their cashflow over the coming months, advisers have a key role to play. Philippa Kelly, Director of ICAEW’s Technical Strategy Business Group said: “Whilst forecasts are increasingly optimistic, there is a mixed picture across the UK as sectors recover at different rates, with some still subject to restrictions, and others assessing what may be longer-term changes in consumer behaviour. Chartered accountants within or supporting businesses have a key role in seeing who may be on the wrong side of a “K shaped recovery” at the current time, and who may need to act in good time to take advantage of the PAYG options available to them.”
Financial Services Faculty helpsheet: COVID-19 challenges for business: Bounce Back Loan Scheme repayments