Originally written by Timothy Adler on Small Business
Banks may outsource repayment of Bounce Back Loans gone bad to external debt collectors because the task will prove too overwhelming inhouse.
The government itself estimates that nearly two thirds of Bounce Back Loans may never be repaid, costing the Treasury £26bn.
Government and the banks are talking about establishing a panel of debt collection agencies that would all follow an agreed code of practice.
>See also: HSBC will not accept any more Bounce Back Loan applications
According to the Times, government officials have already contacted debt collection agencies including Arrow Global to see whether they would chase unpaid Bounce Back Loans. Only when the agency has exhausted chasing repayment would the bank then claim on the 100-per-cent state guarantee.
Lenders say they would have to hire hundreds of staff and build dedicated loan recovery call centres to cope with the volume of bad debts.
Bounce Back Loans are due to start being repaid in May.
Of course, high street lenders have outsourced bad debt collection for years. The collection agency chases the bad loan on a contingency basis, keeping a percentage of any loan repaid as a fee. A large percentage of businesses owing banks money settle immediately once
Tag Archive for Business loans
Hot Business News Today
Small businesses have average of just £9,000 left from Bounce Back Loan
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Businesses have an average of just over £9,000 left from any Bounce Back Loan they took out to save their struggling firms.
Over a million small businesses have taken out the state-backed emergency loans and the majority expect what’s left of the cash to run out by the end of September.
And nearly two thirds of SMEs (63 per cent) surveyed that have taken out Bounce Back Loans were unaware that the deadline for applying for the larger Coronavirus Business Interruption Loan Scheme (CBILS) is also the end of this month.
>See also: Where to find your £1,000 small business lockdown grant
Of the 1.2m small businesses that have taken out Bounce Back Loans, 39 per cent used the cash to pay suppliers and 29 per cent used the £50,000 maximum loan available to set up e-commerce stores and online shopping channels.
According to a MarketFinance survey, most SMEs (76 per cent) would be keen on having a CBILS facility “on ice” in case they need it later in the year in anticipation of larger bills, taxes due towards the end of the year.
>See also: Boris must ‘act now’ to save businesses from going under
Over three quarters of small
Hot Business News Today
Small businesses have average of just £9,000 left from Bounce Back Loan
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Businesses have an average of just over £9,000 left from any Bounce Back Loan they took out to save their struggling firms.
Over a million small businesses have taken out the state-backed emergency loans and the majority expect what’s left of the cash to run out by the end of September.
And nearly two thirds of SMEs (63 per cent) surveyed that have taken out Bounce Back Loans were unaware that the deadline for applying for the larger Coronavirus Business Interruption Loan Scheme (CBILS) is also the end of this month.
>See also: Where to find your £1,000 small business lockdown grant
Of the 1.2m small businesses that have taken out Bounce Back Loans, 39 per cent used the cash to pay suppliers and 29 per cent used the £50,000 maximum loan available to set up e-commerce stores and online shopping channels.
According to a MarketFinance survey, most SMEs (76 per cent) would be keen on having a CBILS facility “on ice” in case they need it later in the year in anticipation of larger bills, taxes due towards the end of the year.
>See also: Boris must ‘act now’ to save businesses from going under
Over three quarters of small
Hot Business News Today
Small businesses should ‘only repay coronavirus debt once back in profit’
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Small businesses should only repay state-backed coronavirus debt once they are back in profit, a centre-right thinktank has argued.
The taxman could claw back emergency COVID-19 funding once businesses are back trading at a profit, argues Onward.
This would be through a surcharge on taxable profits and shareholder salaries, paying off your Bounce Back Loan or Coronavirus Business Interruption Loan.
>See also: Where to find your £1,000 small business lockdown grant
The issue is pressing because, according to the ONS, one in five small businesses are already “zombie” companies – meaning the annual cost of servicing their business debt equals their profits.
And nearly one in 20 firms (4.3 per cent) are technically insolvent with liabilities greater than their assets, due to the levels of debt they have already built up since March. These firms employ an estimated 1.8m workers.
Debt levels have leapt during this year’s lockdown as businesses tapped the government’s emergency loan schemes to meet costs, leaving many overburdened with debt. About £53bn has been loaned to small and medium-sized businesses finance industry lobby group The CityUK estimates that £35bn may not be repaid.
>See also: Lloyds rapped for forcing Bounce Back Loans borrowers to open accounts
The
Hot Business News Today
Small businesses should ‘only repay coronavirus debt once back in profit’
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Small businesses should only repay state-backed coronavirus debt once they are back in profit, a centre-right thinktank has argued.
The taxman could claw back emergency COVID-19 funding once businesses are back trading at a profit, argues Onward.
This would be through a surcharge on taxable profits and shareholder salaries, paying off your Bounce Back Loan or Coronavirus Business Interruption Loan.
>See also: Where to find your £1,000 small business lockdown grant
The issue is pressing because, according to the ONS, one in five small businesses are already “zombie” companies – meaning the annual cost of servicing their business debt equals their profits.
And nearly one in 20 firms (4.3 per cent) are technically insolvent with liabilities greater than their assets, due to the levels of debt they have already built up since March. These firms employ an estimated 1.8m workers.
Debt levels have leapt during this year’s lockdown as businesses tapped the government’s emergency loan schemes to meet costs, leaving many overburdened with debt. About £53bn has been loaned to small and medium-sized businesses finance industry lobby group The CityUK estimates that £35bn may not be repaid.
>See also: Lloyds rapped for forcing Bounce Back Loans borrowers to open accounts
The
Hot Business News Today
Lloyds rapped for forcing Bounce Back Loans borrowers to open accounts
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Lloyds has been named and shamed with for forcing small businesses to open paid-for business current accounts to access Bounce Back Loans.
The competition watchdog said that Lloyds, one of the largest in the small business market, treated small companies unfairly by requiring them to open an account to draw down state-backed Bounce Back Loans.
The Competition and Markets Authority that 30,000 customers who had been running their businesses using personal accounts were told by Lloyds and its Bank of Scotland arm that they must open a business account to access Bounce Back Loans.
>See also: Banks ‘will be pushed’ into closing down SMEs unable to repay Covid debt
The scheme, which has underwritten £35.5bn of credit, provides lenders with a 100-per-cent state guarantee on low-interest loans to qualifying small companies. High street banks, rather than the government, have to provide the working capital.
Back in 2002, Lloyds agreed not to ask personal account customers to open a separate account if they wanted to borrow money from the bank – a practice known as “bundling”.
But when it came to Bounce Back Loans, Lloyds asked existing customers operating their firms out of personal accounts to open fee-charging business accounts
Hot Business News Today
Lloyds rapped for forcing Bounce Back Loans borrowers to open accounts
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Lloyds has been named and shamed with for forcing small businesses to open paid-for business current accounts to access Bounce Back Loans.
The competition watchdog said that Lloyds, one of the largest in the small business market, treated small companies unfairly by requiring them to open an account to draw down state-backed Bounce Back Loans.
The Competition and Markets Authority that 30,000 customers who had been running their businesses using personal accounts were told by Lloyds and its Bank of Scotland arm that they must open a business account to access Bounce Back Loans.
>See also: Banks ‘will be pushed’ into closing down SMEs unable to repay Covid debt
The scheme, which has underwritten £35.5bn of credit, provides lenders with a 100-per-cent state guarantee on low-interest loans to qualifying small companies. High street banks, rather than the government, have to provide the working capital.
Back in 2002, Lloyds agreed not to ask personal account customers to open a separate account if they wanted to borrow money from the bank – a practice known as “bundling”.
But when it came to Bounce Back Loans, Lloyds asked existing customers operating their firms out of personal accounts to open fee-charging business accounts
Hot Business News Today
Banks ‘will be pushed’ into closing down SMEs unable to repay Covid debt
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Banks will be pushed into foreclosing on small businesses unable to repay Covid debt, a City insider has warned.
This is because foreclosing on SMEs unable to repay emergency coronavirus loans will be the only way banks can trigger the government’s guarantee to repay bad Covid debt. Banks would have to prove a loss before they can claim on the guarantee.
The government’s lending schemes have provided nearly £53bn to some 1.2m companies, including £35.5bn worth of bounce back loans — which include a 100 per cent guarantee for small business loans – and £13.7bn through the coronavirus business interruption loan scheme (CBILS).
The Office for Budget Responsibility has warned that in a worst-case scenario, £35bn of the Covid debt will never be repaid. The banks themselves believe that up to half of bounce back loans alone will never be repaid.
A Business Banking Resolution Service survey in May discovered that nearly half of small businesses that have taken out government emergency coronavirus loans do not intend to repay them.
The Treasury has turned a deaf ear to a City of London push for it to set up a bad COVID-19 debt bank, an idea proposed by Lord
Hot Business News Today
Banks ‘will be pushed’ into closing down SMEs unable to repay Covid debt
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Banks will be pushed into foreclosing on small businesses unable to repay Covid debt, a City insider has warned.
This is because foreclosing on SMEs unable to repay emergency coronavirus loans will be the only way banks can trigger the government’s guarantee to repay bad Covid debt. Banks would have to prove a loss before they can claim on the guarantee.
The government’s lending schemes have provided nearly £53bn to some 1.2m companies, including £35.5bn worth of bounce back loans — which include a 100 per cent guarantee for small business loans – and £13.7bn through the coronavirus business interruption loan scheme (CBILS).
The Office for Budget Responsibility has warned that in a worst-case scenario, £35bn of the Covid debt will never be repaid. The banks themselves believe that up to half of bounce back loans alone will never be repaid.
A Business Banking Resolution Service survey in May discovered that nearly half of small businesses that have taken out government emergency coronavirus loans do not intend to repay them.
The Treasury has turned a deaf ear to a City of London push for it to set up a bad COVID-19 debt bank, an idea proposed by Lord
Hot Business News Today
How do I apply for a Coronavirus Business Interruption Loan?
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
How do I apply for a Coronavirus Business Interruption Loan?
UPDATED: Today (July 30), the Coronavirus Business Interruption Loan Scheme has been relaxed to make more SMEs eligible for emergency funding.
Until now, an SME that was classed as an ‘undertaking in difficulty’ was barred from getting access to the loan unless the business was less than three years old. They’d be an undertaking in difficulty if, by deducting accumulated losses from its reserves, it was left with a negative amount greater than half of its subscribed share capital, as of December 2019.
This changes mean that SMEs with fewer than 50 employees and a turnover of less than £9m will not be classed as an undertaking in difficulty, unless they’re subject to insolvency proceedings or receiving certain types of aid. It’s expected to help small businesses that have previously secured private equity and venture capital funding.
Allie Renison, head of Europe and trade policy at the Institute of Directors, said:
“This is a welcome move towards helping more British businesses access much-needed finance. The UID test has caused a lot of frustration, and the IoD has been knocking hard on the door of both government and Brussels