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Bounce Back Loans and CBILS guarantees need to be increased now

Businesses have not been supported directly and now face a funding crisis, says Richard Churchill.

As we approach the end of the second lockdown, businesses need further support from the Chancellor to bounce back.

The Chancellor has sought to protect jobs but has done little to support businesses directly and many face a funding crisis.

On exiting the previous lockdown, businesses used the Bounce Back and Coronavirus Business Interruption Loan Scheme (CBILS) funding available to make themselves Coronavirus secure, modify their businesses and buy stock, especially those focused on Christmas sales.

With the second lockdown, UK businesses no longer have any cash resources left to restart their businesses again.

The Chancellor has simply extended the deadlines for application for Bounce Back and CBILS lending to 31 January and allowed businesses who borrowed less than the limit of £50,000 or 25% of their turnover to top-up. Most businesses have already drawn their maximum available funding under the Bounce Back Loan scheme, so this is unlikely to yield any further funds for them.

Businesses have many expenses in addition to salaries and are on a liquidity cliff edge of no additional funding and limited ability to trade. And with 2021 on the horizon, they know many of their previously deferred tax liabilities will need to be started to be repaid.

When the Chancellor asks businesses to bounce back again he needs to enhance the current measures in place. For those businesses accessing the Bounce Back Loan scheme, he should increase the limit of Bounce Back Loans to either £75,000 or £100,000. For those businesses accessing the CBILS lending scheme, he should increase the Government guarantee to 100% on CBILS borrowing of up to £250k and ask banks to recalculate affordability measures on borrowings based on the extended 10-year term for CBILS borrowings and allow businesses to increase their existing loans.

Just increasing levels of debt for companies is not healthy for the businesses or the UK economy in the medium- to long-term. Business owners do not want to work to simply service debt and there must be an equitable split of value created in businesses supported by this additional borrowing between business owners and the UK Government.

It had been hoped that the Successor Loan Scheme would start to provide these solutions, but since its announcement and planned launch in January 2021 no further details have been announced and it must be assumed will now be deferred. If not, UK business would welcome news on longer-term funding solutions.

Would you like to know more?

If you would like to discuss the above or how it may affect you, please get in touch with your usual Blick Rothenberg contact or Richard Churchill, using the details to the right.

For any press queries, please contact David Barzilay whose details are to the right.