Bounce back loans extension ‘won’t save all businesses’
An extension to the term of bounce back loans (BBL) may not be enough to support hard-hit businesses, Funding Xchange has warned.
The Treasury has unveiled changes to the BBL scheme, letting businesses who have started repaying their BBL to request an extension of their loan term to 10 years from six years, at the same fixed interest rate of 2.5 per cent.
But business finance aggregator Funding Xchange has warned that still may not be enough.
Initial data from Funding Xchange when the BBL scheme was first introduced by the government indicated that almost two thirds of borrowers would not have sufficient free cashflow to be able to repay their loans within the six year repayment period, with just seven per cent showing affordability from less than 50 per cent of their available cashflow.
Funding Xchange also questioned how the pay as your grow facility would work if banks don’t have effective open banking technology so they can see a borrower’s finances from another provider.
“Extending the repayment period from six years to 10 years will have a positive impact on around one in five of the businesses,” Katrin Herrling (pictured), chief executive of Funding Xchange, said.
“We still forecast that more than half of the businesses who have used the scheme may be unable to repay.
“Many are already distressed and the 46 per cent of borrowers who had no prospect of being able to repay anyway will still not be able to repay.”
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