CBILS and BBLS defaults could hit £22bn
Almost a third of coronavirus business interruption loan scheme (CBILS) and bounce back loan scheme (BBLS) loans could go into default, it has been predicted.
Initial estimates from the Office for Budget Responsibility, shared with City A.M., have forecasted that defaults could reach £22bn, which would be around 30 per cent of the £73.75bn delivered through the two schemes in total, £26.39bn of which was through CBILS and £47.36bn through BBLS.
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“We may see billions in CBILS and BBLS loans default and the Pay as you Grow scheme for BBLS loans may only delay, rather than reduce the overall level of defaults,” said Dan Barrett, partner at debt advisory firm ACP Altenburg, who shared the data, told City A.M..
“Businesses looking for funding to grow or acquire need to consider that many lenders are extremely busy as the market is seeing an upsurge in activity, and many lenders are still getting to grips with the vast amount of money they lent under CBILS and BBLS.”
Following the first one-year period in which interest and principal payments were both not needed, scheduled repayments have started for over half of CBILS and BBLS loans. The end of the government’s furlough scheme will likely exacerbate many businesses’ cashflows and hence also their ability to make repayments.
In August, it was reported that officials and bankers suggested that as much as £5bn from BBLS loans is at risk of not being repaid, significantly lower than previous estimates of up to £27bn.