Defaults on CBILS and BBLS loans could reach £22bn if initial estimates from the Office for Budget Responsibility (OBR) are correct, according to new calculations, City A.M. reports.
Of the roughly £74bn lent under the BBLS and CBILS schemes a default figure of £22bn of would represent about 30 per cent.
“We may see billions in CBILS and BBLS loans default and the Pay as you Grow scheme for BBLS loans may only delay, rather than reduce the overall level of defaults,” Dan Barrett - partner at debt advisory firm ACP Altenburg, who shared the data - said.
Mr Barrett said the forecast is based on Office for Budget Responsibility estimates applied to the final BBLS and CBILS lending figures, with the main source being CJRS amounts paid up to 16 August of this year.
“Businesses looking for funding to grow or acquire need to consider that many lenders are extremely busy as the market is seeing an upsurge in activity, and many lenders are still getting to grips with the vast amount of money they lent under CBILS and BBLS,” he added.
Scheduled payments have now commenced on the majority (55 per cent) of CBILS and BBLS loans, following the initial one year period where neither interest nor principal payments were required. So funding those payments is likely to be a key focus for many UK businesses, particularly where a CBILS loan with a high interest rate was taken out.
This focus is likely to be exacerbated by the recent end of the Coronavirus Job Retention Scheme (CJRS). It was a key source of support for businesses during the pandemic, with £68.5bn claimed by employers.
The closure of the CJRS will put a strain on the cashflows of many businesses, many businesses will also need to find additional cash to repay deferred VAT.
One short-term option for businesses struggling with their repayments is the Government’s ‘Pay as you Grow’ scheme. It allows companies to take a 6-month payment holiday on their BBLS payments.
The scheme is however not available for CBILS borrowers and using the Pay as you Grow scheme may adversely impact a businesses’ ability to obtain funding in the future because it only delays repayments.
The UK Government is also offering the Recovery Loan Scheme, which may be available for some businesses. However, this scheme only runs until the end of 2021, Mr Barrett cautioned, and although the Government is providing a guarantee to lenders, it will not be covering borrower interest payments for the first year, as it did with CBILS and BBLS borrowing.
Source: City A.M.
Defaults on CBILS and BBLS loans could reach £22bn if initial estimates from the Office for Budget Responsibility (OBR) are correct, according to new calculations, City A.M. reports.
Of the roughly £74bn lent under the BBLS and CBILS schemes a default figure of £22bn of would represent about 30 per cent.
“We may see billions in CBILS and BBLS loans default and the Pay as you Grow scheme for BBLS loans may only delay, rather than reduce the overall level of defaults,” Dan Barrett - partner at debt advisory firm ACP Altenburg, who shared the data - said.
Mr Barrett said the forecast is based on Office for Budget Responsibility estimates applied to the final BBLS and CBILS lending figures, with the main source being CJRS amounts paid up to 16 August of this year.
“Businesses looking for funding to grow or acquire need to consider that many lenders are extremely busy as the market is seeing an upsurge in activity, and many lenders are still getting to grips with the vast amount of money they lent under CBILS and BBLS,” he added.
Scheduled payments have now commenced on the majority (55 per cent) of CBILS and BBLS loans, following the initial one year period where neither interest nor principal payments were required. So funding those payments is likely to be a key focus for many UK businesses, particularly where a CBILS loan with a high interest rate was taken out.
This focus is likely to be exacerbated by the recent end of the Coronavirus Job Retention Scheme (CJRS). It was a key source of support for businesses during the pandemic, with £68.5bn claimed by employers.
The closure of the CJRS will put a strain on the cashflows of many businesses, many businesses will also need to find additional cash to repay deferred VAT.
One short-term option for businesses struggling with their repayments is the Government’s ‘Pay as you Grow’ scheme. It allows companies to take a 6-month payment holiday on their BBLS payments.
The scheme is however not available for CBILS borrowers and using the Pay as you Grow scheme may adversely impact a businesses’ ability to obtain funding in the future because it only delays repayments.
The UK Government is also offering the Recovery Loan Scheme, which may be available for some businesses. However, this scheme only runs until the end of 2021, Mr Barrett cautioned, and although the Government is providing a guarantee to lenders, it will not be covering borrower interest payments for the first year, as it did with CBILS and BBLS borrowing.
Source: City A.M.