UK banks are bracing for an avalanche of demands from businesses to extend the terms of the Bounce Back Loan Program (BBLS), designed to provide quick access to funds amid the coronavirus pandemic.
Via the BBLS, banks have lent more than £ 46 billion to small and medium-sized enterprises (SMEs) since the program began in May 2020. Loans of up to £ 50,000 have been made to help SMEs stay afloat during the downturns. COVID-19 lockdowns. 12-month interest-free loans mature this month, says Financial Times reported Monday (May 3).
Some 42,000 companies have already filed for an extension, according to the calculations of bankers and FT. NatWest told the outlet that it had already contacted some 100,000 borrowers to let them know their loan maturity date was approaching.
Fearful that SMEs will struggle to repay themselves, UK officials have introduced a Growing Payments Program to avoid defaults from businesses still trying to regroup financially after the pandemic.
NatWest said about 75 percent of the 14,000 Growth Borrowers have asked to extend loan maturity dates. About 25 percent requested six-month repayment leave. Two sources told FT that lenders were “pleasantly surprised” that the majority of borrowers just ask for extensions.
Nick Hunter, founder of Falmouth-based recruiting firm Head Hunter Resourcing, told FT that ahead of the payment he was hoping for “last minute” help from the Treasury. Other than that, he plans to seek an extension.
Some companies, however, have yet to use BBLS loan funds, with bankers estimating that up to 30 percent is still in customer accounts. This is believed to be a contributing factor to weak demand for the recovery loan program launched to replace the rebound program, according to FT.
An estimated £ 26 billion in Bounce back loans are fraudulent and could cost taxpayers up to $ 35 billion. The $ 58 billion program launched last year in May had a low entry bar and required little proof of necessity from businesses looking for loans.
Data creditworthiness Begbies Traynor said more than 720,000 UK businesses were struggling to make ends meet after a year of COVID lockdowns and restrictions.