Businesses who borrowed cash under the Bounce Back Loan Scheme (BBLS) should “prepare” for repayments from this year, a major regulator has said.
The Institute of Chartered Accountants in England and Wales (ICAEW) said borrowers impacted by Covid-19 should consider their options – such as the Pay As You Grow (PAYG) scheme – if repayments are unaffordable.
The report comes after the launch of the BBLS in May last year, offering businesses an affordable route to finance to support them throughout the coronavirus pandemic.
But as no interest or repayments were due for the first 12 months, businesses who took out loans on launch are now liable for repayments – even if they have yet to reopen.
According to the latest statistics, some 1.5 million businesses borrowed an estimated £46.5 billion under the scheme, with the average loan value ranging from £27,000 to £33,000 by region.
But the figures also show that the wholesale and retail trade, repair of motor vehicles and motorcycles, and the real estate sector borrowed in “proportionately higher numbers and larger loan amounts”.
With restrictions still looming heavily over some of these sectors, the ICAEW said struggling businesses should consider their repayment options and “take action”.
The Pay As You Grow scheme, for example, will allow firms to extend their loan terms, reduce repayments, or take a repayment holiday.
Commenting on repayment options, 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.”
Abdul Qureshi, Managing Director, Head of Products at Barclays Bank, added: “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.”
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