Businesses need flexible financial support

Results from a BCC poll, conducted in partnership with banking group TSB, reveals that many firms have taken on debt during the pandemic and require flexible repayment solutions to rebuild their revenues and avoid an unsustainable debt crisis. Those who haven’t taken on debt, but may yet need to, favour flexible business banking services that adapt to their needs: 

• 42% of respondents took on debt during the crisis, with more than 1 in 4 businesses saying they may need to scale down operations to repay and 1 in 10 saying they might have to cease trading 
• 44% have not accessed finance so far, but still face challenging business conditions
• Businesses require flexible and responsive support from government and banks as they recover from the crisis

Lending schemes provide critical lifeline to business operations

42% of those surveyed said that they had accessed finance during the pandemic through government lending schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS) or the Bounce Back Loan Scheme (BBLS). These businesses were almost evenly spread across all sectors, with manufacturing firms slightly more likely to have taken out finance.

Those drawing on the schemes were overwhelmingly doing so to support critical day-to-day business operations during the pandemic. 71% said they used finance to support cashflow, 43% for overheads, 40% for paying staff and 32% for paying other debts.

Impact of business debt may weaken recovery

64% of respondents said that the repaying of finance built up during the pandemic might have a negative impact on their business. More than one in four firms (27%) said repaying finance might mean they scale down operations and 26% said they would change their investment plans. Most concerningly, 11% – more than one in ten firms – said they might have to cease trading. Micro firms were more likely to say repaying debt may cause them to cease trading (15%) compared to non-micro firms (6%).

Innovative approaches to repayment and recapitalisation may be needed to prevent thousands of firms from falling into a spiral of unsustainable debt. The survey found that 18% of respondents said they would prefer a ‘student loan’ style scheme – where the loan becomes a contingent tax liability that is repaid on a means-tested basis – if their business was struggling to repay their loan. 16% said they would prefer a longer fixed term period to repay the loan. In contrast, just 4% said they would prefer to convert the debt into an equity stake in their business.

Future financial support likely to be needed

44% of firms surveyed said they had not attempted to access finance during the immediate crisis, but still face challenging business conditions. While 38% have seen increases in revenue from UK customers, a further 38% have seen a decrease. Half of firms (50%) said their cash reserves have slightly or significantly decreased since July 2020.

Faced with this, local lockdowns and the planned withdrawal of various government support schemes in the autumn, more businesses will likely access business banking services in the coming months to support their day-to-day operations and drive the wider economic recovery.

Those looking to do so overwhelmingly require a flexible business banking service, offering a mix of face-to-face and in-person capabilities. 48% of firms said they required personalised or face-to-face support. 44% said they valued digital services – like apps and websites –most highly. A further 44% said fast and easy access to capital was most important and 36% said they preferred a presence in the local community.

Responding to the results, 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.

“With many businesses still facing reduced demand, depleted cash reserves, and continued uncertainty, bold solutions will be needed to prevent thousands of firms across the UK from falling into a spiral of unsustainable debt. If not addressed, large debt burdens could stifle the recovery, threatening jobs and constraining business activity and investment.

“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.”

TSB CEO, Debbie Crosbie said:

“Banks have a vital role to play in helping small businesses survive and thrive. It is very clear they need banks that can provide a full suite of services, including lending, face to face advice and outstanding technology to help them build back better. TSB is focussed on providing this mix for small businesses across the country.”