British businesses that took out loans under the government-backed CBILS scheme are being pressured to pay it back early by the banks, say tax and advisory firm Blick Rothenberg.
Richard Churchill a Busines Advisory Partner at the firm said: “The banks are giving business loans with one hand and them taking them away with another, which is putting businesses under huge pressure at a time when they are already struggling. The banks are changing their attitude to loans and in many cases are requesting that firms pay back some or all of the loans, earlier than planned.
“This is extremely worrying especially as the government-backed scheme guarantees the bank 80% of the loan they are making, and their risk is much lower than it would normally be.”
He added: “The banks are putting businesses under pressure they do not need, which is going to be extremely damaging to UK businesses that have changed business models and produced forecasts going forward on the basis of their existing funding. Clearly, when a business needed borrowing to survive, it is not able to repay significant elements of this only a few months later.
“The banks need to be reminded of their responsibilities to support business and that they are only taking a 20% risk with CBILS, with the government taking 80%. One of the limiting factors of CBILS lending was the loans were for a maximum of six years with a five-year repayment profile. No repayments were due in the first year.
“A practical step to help solve the issue of affordability assessment would be for these loans to be able to be extended over a longer period, therefore reducing the annual repayments. The UK government already has the majority of risk for these loans and events of default need to be minimised. Granting a longer repayment period would be a sensible first step.”