Tag Archive for Bounce Back Loans

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Defaults on Bounce Back Loan repayments lower than feared

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By Anna Jordan on Small Business – Advice and Ideas for UK Small Businesses and SMEs

Defaults on the government’s Bounce Back Loan scheme are set to total up to £5bn – much lower than the previous tens of billions expected.

The estimates from officials and bankers come from an assessment based on the first few months of debt servicing. So far, it shows that between five per cent and ten per cent of SMEs that used the Bounce Back Loan scheme have missed out on repayments.

>See also: Nearly two thirds of Bounce Back Loans could go bad, says government

Bankers said that the expected recovery from Covid-19 helped companies regain their financial independence. One banking executive said that five per cent were already repaid in full on the date that the 12-month interest-free payment ended, saying that not all of the loans were taken out of desperation, but out of caution.

However, some bankers feel they could have pushed back the worst of the issues through its ‘pay as you grow’ scheme, offering repayment holidays of up to six months as well as extended loan terms of up to ten years.

Last year the government predicted that between 35 per cent and 60 per

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Hot Business News Today

Defaults on Bounce Back Loan repayments lower than feared

by  •  • 0 Comments

By Anna Jordan on Small Business – Advice and Ideas for UK Small Businesses and SMEs

Defaults on the government’s Bounce Back Loan scheme are set to total up to £5bn – much lower than the previous tens of billions expected.

The estimates from officials and bankers come from an assessment based on the first few months of debt servicing. So far, it shows that between five per cent and ten per cent of SMEs that used the Bounce Back Loan scheme have missed out on repayments.

>See also: Nearly two thirds of Bounce Back Loans could go bad, says government

Bankers said that the expected recovery from Covid-19 helped companies regain their financial independence. One banking executive said that five per cent were already repaid in full on the date that the 12-month interest-free payment ended, saying that not all of the loans were taken out of desperation, but out of caution.

However, some bankers feel they could have pushed back the worst of the issues through its ‘pay as you grow’ scheme, offering repayment holidays of up to six months as well as extended loan terms of up to ten years.

Last year the government predicted that between 35 per cent and 60 per

Read more...

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Government ‘should write off’ £1.7bn of Covid loan debt

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By Timothy Adler on Small Business – Advice and Ideas for UK Small Businesses and SMEs

The government should write off £1.7bn worth of Covid loan debt if thousands of small businesses shopkeepers are not going to go to the wall.

Independent high street businesses now owe four times as much as they did a year ago, with firms owing a total of £1.7bn, said Bill Grimsey, ex-boss of supermarket chain Iceland and DIY chains Wickes and Focus DIY.

According to Grimsey, small shops have survived the pandemic by borrowing, but are now faced with the task of paying it back. He called for a government “forgiveness scheme” to write off taxpayer-backed loans for viable small businesses.

>See also: HMRC to go easy on small business strangled with Covid debt

Unless the government steps in, the UK could face a “tsunami” of shop closures this autumn, the veteran retail boss said.

Grimsey pointed out that France is working on ways to help its small businesses get out from under the mountain of Covid debt.

Former chancellor George Osborne has also said the government should just write off small business Covid-19 financial support, while the Federation of Small Businesses said Bounce Back Loan debt should be converted into

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Hot Business News Today

Government ‘should write off’ £1.7bn of Covid loan debt

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By Timothy Adler on Small Business – Advice and Ideas for UK Small Businesses and SMEs

The government should write off £1.7bn worth of Covid loan debt if thousands of small businesses shopkeepers are not going to go to the wall.

Independent high street businesses now owe four times as much as they did a year ago, with firms owing a total of £1.7bn, said Bill Grimsey, ex-boss of supermarket chain Iceland and DIY chains Wickes and Focus DIY.

According to Grimsey, small shops have survived the pandemic by borrowing, but are now faced with the task of paying it back. He called for a government “forgiveness scheme” to write off taxpayer-backed loans for viable small businesses.

>See also: HMRC to go easy on small business strangled with Covid debt

Unless the government steps in, the UK could face a “tsunami” of shop closures this autumn, the veteran retail boss said.

Grimsey pointed out that France is working on ways to help its small businesses get out from under the mountain of Covid debt.

Former chancellor George Osborne has also said the government should just write off small business Covid-19 financial support, while the Federation of Small Businesses said Bounce Back Loan debt should be converted into

Read more...

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Can I liquidate my company if I have a Bounce Back Loan?

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Originally written by David Tattersall on Small Business
Can I liquidate my company if I have a Bounce Back Loan?
As a company director, neglecting creditor interests will instantly land you in the firing line of an insolvency service investigation into director conduct when entering company liquidation. Taking the informal company closure route by striking off your business, also known as dissolution, is a route designed for businesses laden with no company debts. Therefore, investigations into director conduct are not conducted as standard during company strike off.
A new legislative measure preventing company directors from informally closing their business to avoid an investigation into director conduct, instead of entering a formal insolvency process, is due to come into play. The first reading in Parliament recently took place and the measure appears to come into force in late 2021.
As Bounce Back Loan repayments fall due following the optional pause on repayments, company directors will need to brace company cash flow for additional outgoings. Currently, if this route is pursued by your limited company with an outstanding Bounce Back Loan, rather than a formal insolvency route, you will likely receive an “Objection to Company Strike Off Notice”. After the rules are approved, this will ring

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Hot Business News Today

Can I liquidate my company if I have a Bounce Back Loan?

by  •  • 0 Comments

Originally written by David Tattersall on Small Business
Can I liquidate my company if I have a Bounce Back Loan?
As a company director, neglecting creditor interests will instantly land you in the firing line of an insolvency service investigation into director conduct when entering company liquidation. Taking the informal company closure route by striking off your business, also known as dissolution, is a route designed for businesses laden with no company debts. Therefore, investigations into director conduct are not conducted as standard during company strike off.
A new legislative measure preventing company directors from informally closing their business to avoid an investigation into director conduct, instead of entering a formal insolvency process, is due to come into play. The first reading in Parliament recently took place and the measure appears to come into force in late 2021.
As Bounce Back Loan repayments fall due following the optional pause on repayments, company directors will need to brace company cash flow for additional outgoings. Currently, if this route is pursued by your limited company with an outstanding Bounce Back Loan, rather than a formal insolvency route, you will likely receive an “Objection to Company Strike Off Notice”. After the rules are approved, this will ring

Read more...

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Small business owners who duck out of repaying Covid debt face ban

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Originally written by Timothy Adler on Small Business
Small business owners who wind up their companies to avoid having to repay Covid debt could be banned from being company directors.
Owner-directors found guilty of abusing insolvency procedures to duck out of having to repay Covid debt taken out by their small business could be banned for up to 15 years.
About 1.5m small businesses have taken out Bounce Back Loans through a scheme that offered up to £50,000 interest free for a year.
>See also: Nearly two thirds of Bounce Back Loans could go bad, says government
And the new beefed-up Insolvency Service will be able to investigate retrospectively to already wound-up companies.
The government promised to clamp down on any potential fraud in repaying emergency Covid-19 loans in the Budget earlier this year.
Officials are keen to sew up the insolvency loophole to curb any losses to the taxpayer as banks start to charge interest or seek to recoup loans once the repayment holidays on the government-backed schemes end.
>See also: Half of small businesses will never repay Bounce Back Loans, warn banks
Dissolution via strike-off or voluntary liquidation is only supposed to be used by a small business without a prior insolvency and only when the company

Read more...

Hot Business News Today

Small business owners who duck out of repaying Covid debt face ban

by  •  • 0 Comments

Originally written by Timothy Adler on Small Business
Small business owners who wind up their companies to avoid having to repay Covid debt could be banned from being company directors.
Owner-directors found guilty of abusing insolvency procedures to duck out of having to repay Covid debt taken out by their small business could be banned for up to 15 years.
About 1.5m small businesses have taken out Bounce Back Loans through a scheme that offered up to £50,000 interest free for a year.
>See also: Nearly two thirds of Bounce Back Loans could go bad, says government
And the new beefed-up Insolvency Service will be able to investigate retrospectively to already wound-up companies.
The government promised to clamp down on any potential fraud in repaying emergency Covid-19 loans in the Budget earlier this year.
Officials are keen to sew up the insolvency loophole to curb any losses to the taxpayer as banks start to charge interest or seek to recoup loans once the repayment holidays on the government-backed schemes end.
>See also: Half of small businesses will never repay Bounce Back Loans, warn banks
Dissolution via strike-off or voluntary liquidation is only supposed to be used by a small business without a prior insolvency and only when the company

Read more...

Hot Business News Today

Small businesses struggling to get credit from Recovery Loan Scheme

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Originally written by Timothy Adler on Small Business
Small businesses are struggling to get loans through the Recovery Loan Scheme launched earlier this month to replace emergency schemes such as Bounce Back Loans, according to the Federation of Small Businesses (FSB).
Banks blame tougher credit checks and higher interest rates for the sluggish take-up.
Craig Beaumont, chief of external affairs at the FSB, told the Sunday Times that “the government should be throwing everything it’s got at getting businesses across this ‘unlock’ phase and into the recovery, to avoid businesses falling at the final hurdle because of lack of cashflow”.
>See also: How does the Recovery Loan Scheme compare with other alt-fi options?
Applications were in the “low thousands” in the first week, according to the Financial Times, with fewer again accepted as potential borrowers. Many of these applicants were existing users of government coronavirus loan schemes, the newspaper reported.
According to the FT, one of the largest UK banks received fewer than 500 applications in the first two days after the scheme went live on April 7. This same bank approved close to 2,000 applications in the same period when the Bounce Back Scheme opened last year.
Recovery Loan Scheme application rules are much more stringent

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Covid debt drowning small businesses to the tune of £104bn

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Originally written by Timothy Adler on Small Business
Bank lending to small businesses hit over £100bn last year as SMEs scrambled for Government-backed Covid debt facilities.
Overdraft applications flatlined, despite gross bank lending to SMEs rising by 82 per cent to £104bn.
Around 1.5m Bounce Back Loan and Coronavirus Business Interruption Loan Scheme Covid debt facilities had been approved by the end of 2020.
And nearly one third of businesses accessed grant funding last year, compared to just 2 per cent in 2019.
The pandemic has hit the smallest firms hardest, with 49 per cent of sole trader and self-employed businesses reporting a fall in turnover compared to 38 per cent of businesses with 50-249 employees.
Worryingly, despite the flood of cheap Government lending, one third of small businesses surveyed in the latest British Business Bank report expect to shrink.
Only one in five (21 per cent) were expecting to grow, compared with 28 per cent the previous year.
SMEs in business services (25 per cent) and production (23 per cent) sectors were most optimistic about their prospects for growth over the next year, with businesses in construction and other services sectors least optimistic (both 17 per cent).
Encouragingly, small businesses have amassed a war chest due to the

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