Lenders have been urged to offer forbearance and support for small businesses as the first bounce back loan (BBL) repayments come due.
Financial collections company Target Group has warned that many small businesses will struggle to recover from the financial effects of the pandemic, noting that the ability of businesses to repay their BBLs will be a key indicator on the UK’s post-Covid economy.
The first BBL repayments are due to be made this week.
“The number of loans that are repaid on time should give an indication as to how businesses have fared since the first lockdown in March 2020,” said Katie Pender, head of client solutions at Target Group.
“It will also indicate whether additional support should be made available in the aftermath as restrictions end.”
Pender warned lenders that their forbearance process “may be strenuously tested” by the BBL scheme.
“Providing payment extensions and supporting borrowers who are still experiencing financial hardships will require dedicated effort and efficient processes,” she added.
“In order to manage the collection of loan payments, whilst also providing support and lenience to customers, the main priority for lenders should be to re-evaluate their customer demographics.
“They need to identify which borrowers’ circumstances are likely to be altered over the past 12-months, and evaluate both the financial and mental wellbeing of those borrowers when collecting repayments.
“It’s also important for lenders to demonstrate patience and empathy for those who are currently experiencing financial difficulty. The pandemic has uncovered unprecedented challenges that previously would have seemed unimaginable but keeping an open dialogue and remaining patient throughout the repayment process is key to achieving the best outcomes for all parties involved.”
More than £46.5bn had been loaned to 1,531,095 UK-based companies under the BBL scheme by the time the scheme closed on 31 March 2021.