More than one in four businesses that took on debt during the pandemic say they may need to scale down operations to repay, a British Chambers of Commerce (BCC) poll shows.
According to the research, 42% of respondents said they took on government-backed debt during the crisis, and one in 10 said they may have to cease trading.
Of those who used the schemes during the pandemic, 71% said they used it to support cashflow, 43% for overheads, 40% said they used the support to pay staff and 32% for paying other debts.
The most recent Treasury data shows that over £50bn in business support loans have been granted across the Coronavirus Business Interruption Loan Scheme (CBILS), Bounce Back Loan Scheme (BBLS) and the Large Business Interruption Scheme (CLBILS). There has been over 1.5 million applications across the three government-backed schemes.
The BBLS has seen approvals of over £35bn in funding across nearly 1.2 million loans, and over £13bn has been granted across 60,400 loans through the CBILS. The CLBILS has seen 516 approved loans totalling £3.5bn.
The poll from the chamber of commerce also revealed that 64% of respondents said the repaying of finances built up during the pandemic might have a negative impact on their business. Some 27% said they may need to scale down operations to make repayments.
Some 44% of firms surveyed said they had not attempted to access finance during the immediate crisis but still face challenging business conditions. The results show that 38% have seen a decrease in revenue from UK customers, but the same amount have seen an increase.
BCC director general Adam Marshall said: “Government loan schemes have been a lifeline for many businesses during the pandemic, so many firms have taken on debt in order to survive.
“Others who have weathered the immediate storm may yet need access to finance for working capital to help their businesses recover and grow. Ministers should consider whether some loan schemes should be extended beyond the autumn to help.
“Over the coming months, government, regulators and banks must work together with business communities to find solutions that help firms repay coronavirus loans sustainably, and access the support and services they need at this challenging time.”
The impact of Covid-19 on business will be discussed at this year’s digital Lending Summit. To book your place, click here.