Thousands of SMEs ‘Unable to Repay Covid Loans’

Written by: Keith Tully

Woman struggling with covid loansThousands of small and medium-sized enterprises across the UK are currently unable to repay the loans they took on to survive and cover costs during the Covid crisis.

That’s according to new research, which suggests roughly 10 per cent of SMEs that took on loans backed by government support during the pandemic could not now meet repayment demands in relation to those debts.

Just less than 60 per cent of SMEs are understood to have accessed government-backed Covid loans during the crisis, which equates to around 3.5 million businesses.

Many companies have been able to recover their revenues and profit-making capabilities in recent quarters and so they can make debt repayments but many others are clearly struggling to reach that position.

The latest figures on these subjects have been compiled by the research firm YouGov on behalf of the online legal advice platform Lawbite and based on polling of over 500 SME decisionmakers.

For the many thousands of SMEs that cannot currently repay their debts, disruptions to supply chains and late payments are cited as major causes of financial difficulty, City AM reports.

Cashflow problems are also understood to be preventing a significant proportion of SMEs from investing in ways that might improve their performance and their prospects for the future.

With the furlough scheme set to close in a matter of weeks and Covid loans now needing to be repaid by millions of SMEs, there is likely to be an increased focus on issues around business finance in the coming months.

“The end of furlough and repayment of Covid loans is placing a significant strain on the cash flow of thousands of our SMEs,” said Clive Rich, the founder of Lawbite.

“This is without even considering other challenges like Brexit, which also harms supply chains, cash flow and employment,” he added.

Mr Rich has also said the government should be looking at measures to improve SME access to finance and should be incentivised to find ways of becoming more efficient by using innovative technologies.

Separately, research carried out recently by the British Chambers of Commerce (BCC) suggested that one in five businesses were planning to cut their staff numbers because furlough support was cut back at the beginning of August.

Around 1.9 million people were understood to be on furlough at the start of July, with many thousands of jobs expected to be lost as the scheme is wound down heading into the autumn.

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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