Government loan schemes found to be working effectively

The government-backed coronavirus lending schemes are reaching the businesses which need it the most, new research has revealed.

According to a survey from BVA BDRC, commissioned and analysed by UK Finance, firms which have secured finance through the coronavirus business interruption loan scheme (CBILS) or the bounce back loan scheme (BBLS) said they are facing greater economic distress. As of last week lenders had provided £34.9bn through the government schemes.

Of those who have received a government-backed loan, 58 per cent have less than three months in cash reserves, compared to an average of 39 per cent across all businesses.

Over three quarters (78 per cent) of these business owners have done or are planning to put some of their personal finances into their business.

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Funding through these schemes has also helped businesses adapt to the new economic environment. Almost half (45 per cent) have changed their business model to allow for more online and telephone orders – compared to an average of 26 per cent across the UK.

These businesses are also more optimistic about the future, with 87 per cent of loan recipients saying they will survive, higher than the national average of 83 per cent.

Almost 90 per cent of businesses which received an answer from their CBILS or BBLS application were offered a facility.

Read more: 14 per cent of SMEs use personal savings for support during Covid-19

“The banking and finance sector has a clear plan to help get businesses through these tough times,” said Stephen Jones, chief executive of UK Finance.

“The coronavirus crisis has created huge challenges for businesses, and lenders are committed to giving companies of all shapes and sizes the right support.

“The industry has already approved hundreds of thousands of loan facilities over the past three months, ensuring those firms with the greatest need get the finance they require.

“We stand ready to go further, and would urge any business concerned about their financial situation to contact their lender.

“It’s important to remember that any lending provided under government-backed schemes is a debt not a grant, and so firms should carefully consider their ability to repay before applying.”

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The research finds that the Covid-19 crisis has negatively impacted 69 per cent of businesses, with three out of five (60 per cent) not expecting to return to growth in the near future, and only 23 per cent predicting an expansion of their business.