Finance understands the vital role it plays in recovery
Stephen Pegge is Managing Director of Commercial Finance at UK Finance
From the beginning of the Covid-19 outbreak, the banking and finance industry has understood the critical role it plays in helping steer businesses through the sudden business interruption and uncertain outlook.
The lockdown was vital to halt the spread of the virus. But it’s impact, and that of the virus itself, also required an unparalleled package of support to minimise business failures, job losses and long-term scarring of the economy.
Before the coronavirus pandemic struck, small and medium-sized businesses across the UK typically borrowed around £5 billion a month. Over May and June, they borrowed closer to £40 billion.
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This striking figure shows unprecedented demand for finance amongst the UK business community and the scale of the challenges facing the economy.
Working closely with the government, lenders have put in place a clear plan to ensure firms can access the financing they need.
An important part of this is the government-backed lending schemes such as the Bounce Back Loan Scheme (BBLS) and Coronavirus Businesses Interruption Loan Scheme (CBILS), which between them have provided over £50 billion to almost 1.2 million businesses.
Figures published today show this funding is reaching every corner of the country. Lending has been spread evenly across the devolved nations and regions of the UK, from the South West to Scotland, in line with the number of businesses in each area. This suggests finance providers have effectively distributed support to where it was needed.
The finance sector has continued to work closely with HM Treasury and British Business Bank to improve the lending schemes where necessary to speed up processes and get money to those viable businesses that need it.
This has included working to get new lenders accredited as quickly as possible so that businesses can access financial support across over 100 finance providers, including high-street banks and specialist and fintech lenders.
More recently, we have been advocating changes to state aid rules that could improve access to government-lending schemes. Previously, these EU rules had meant some viable businesses had struggled to secure loans under the schemes because they were deemed to be “undertakings in difficulty”, particularly those that were growing fast and burning through share capital.
The EU updated the legislation last month, in recognition that it was not appropriate for the times we’re living in, meaning firms with fewer than 50 employees and less than £9m in turnover will be exempt. Now that these changes have been implemented in the UK, they should make a real difference in helping some businesses secure the finance they need.
Of course, it is important for businesses to remember that any lending provided under government-backed schemes is a loan not a grant, and so they should carefully consider their ability to repay before applying. However, government-backed loans are just one part of the industry’s wider support for businesses during this crisis.
Providers are also offering other forms of commercial lending, capital repayment holidays, extended overdrafts and asset-based finance – meaning there is a range of help available for any firm that needs it.
The key message from the industry is that whether you’re sole trader in a rural area or a company with hundreds of employees in a major city, the banking and finance industry stands ready to offer the right support to suit your needs.