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16


FUNDING


IN ASSOCIATION WITH:


AVOIDING THE CLIFF EDGE


Alarm bells have been sounding. Warnings of widespread failure among the 1.4m UK small businesses that borrowed cash to see them though the pandemic have been getting louder.


Fears have been expressed that thousands of ‘zombie companies’ are being created – surviving but without resources to invest or grow.


In a move to see off those fears chancellor Rishi Sunak announced in February that businesses were getting more time to repay their government support loans.


 businesses more “breathing space to get back on their feet”.


Around £45bn has been borrowed under the government’s ‘Bounce Back’ loan scheme, which offers loans of up to £50,000.


 terms last September. The tweaks to the scheme that have now been announced will give companies the option to extend the length of their loan from six years to ten.


Business can also opt to make interest-only payments for six months, with the ability to use this facility up to three times throughout the loan. They can also opt for an additional six-month 


That move means that, along with the initial 12-month interest and repayment holiday, businesses will have 18 months before having to start paying back.


The changes announced by the chancellor come as more than 600,000 companies that took  were due to start repaying their loans in May.


Large numbers of Lancashire businesses have taken advantage of the bounce back loans


and the government’s Coronavirus Business Interruption Loan Scheme (CBILS).


Under the latter, businesses have been able to  


The government guarantees 80 per cent of the   remains liable for repayments of the capital.


 vital that businesses manage their situation and 


Communication is also critical. No banker likes surprises, especially if it’s bad news


Ian McCulloch, partner at business rescue and recovery specialist Begbies Traynor, based in Preston, says an estimated 70 per cent of  Back and CBILS schemes.


He says: “While the vast majority of these loans will have been taken out in good faith, few would have predicted the Covid pandemic, and associated restrictions on trade, to continue for so long.


“As we approach a second spring under a national lockdown, many are still experiencing disruptions to trade, as well as struggling with the uncertainty over how much longer these restrictions are likely to be in place.”


And he adds: “If you foresee your company having problems in making the necessary repayments to your CBILS or Bounce Back Loans in the coming months, you need to ensure you are having the right conversations with the right people. Talk to your lender about what they can do to help.”


  Beever and Struthers in Blackburn, says in the past year companies have taken on “unprecedented levels of debt.”


He adds: “Cash is king and the lifeblood of any business. Successful cash management involves controlling your costs while collecting income as soon as possible.


“Unfortunately, it’s not always that straightforward.” He warns some businesses may face a “nasty jolt” to their cost base when the furlough scheme ends.


He believes that businesses that have not sought support should consider it, even at this late stage.


 favourable again, and you can always give it back when things normalise. While the main clearing banks seem to be focused on existing customers, the challenger banks and non-bank lenders are actively seeking new customers.”


When it comes to managing loans and funding, he says it is vital to keep on top of the numbers. “Up to the minute information is vital to address potential problems before it’s too late,” he explains.


 monthly. Simple housekeeping and credit control techniques can have a positive effect on 


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