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See you on the other side, says King's Lynn financial adviser

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With £79.3 billion borrowed via the government’s loan schemes, many businesses are now due to start to repay their debt, but a large number are struggling, writes Complete Commercial Finance’s Michael Moore

2020 was a tumultuous year for British business with the greatest disruption since wartime, and for many the government’s loan schemes provided welcome relief in a true moment of crisis. According to the British Business Bank, £79.3bn has been lent through the Government-backed schemes since the pandemic started.

Yet, 12 months on, for many it’s time to start to repay their loan as business returns to normal. My co-director Karl Lanham wrote previously in the Lynn News about the considerations of repaying a Business Bounce Back Loan (BBL), and if you missed the article you can catch it at our website, ccf.finance

Many companies have decided to retain the cash reserve the BBL provides, making monthly repayments and, with the benefits of an unsecured loan with a low interest rate, it’s a well-considered move.

However, a recent survey of more than 1,000 SMEs reported that two-thirds of respondents say they will struggle to repay their loan and around 2.3m firms anticipate defaulting. Interestingly, while eight per cent are yet to start repayments, 17 per cent of SMEs who took a loan have taken a repayment holiday – perhaps pushing decisions further down the line – and those most concerned about repaying their debt are sole traders.

Business finance can be one of the most valuable tools a company can use to grow. As any owner will tell you, winning a contract is simply the starting point and maintaining good cashflow can be a near constant juggling act. However, ordinarily, lenders will test affordability before they offer funding and – understandably in the peak of the pandemic – the government’s BBL scheme did not require such measures to be put in place.

Arguably some of the businesses who say they are unable to repay their BBL were always destined not to survive and the schemes have merely prolonged an inevitable outcome.

I would always advise anyone struggling to meet their business’ financial obligations to reach out to their lender as early as possible. They will give advice and explain the options which, working with your accountant, may be possible to be constructed into a long-term repayment plan.

In truth, most companies experience ebbs and flows in trading. In the current ‘hot’ economy many local firms are facing challenges of accelerated growth including stock management, staffing and meeting demand, which is putting new pressures on cashflow.

Alternative forms of lending can bridge some of these issues and I urge anyone struggling with their business finance to seek advice rather than ‘wait and see’. By taking action now, more companies will be able to ride out the situation and emerge successful on the other side.

For more information, contact Michael Moore at Complete Commercial Finance on 01553 611619 or visit ccf.finance

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