Two thirds of SMEs will find it difficult to repay government-supported loans


Two-thirds of small and medium-sized enterprises (SMEs) that took out a government-backed loan during the pandemic said they would have difficulty paying it back.

This equates to 2.3 million SMEs who expect to never repay their loan.

A survey of over 1,000 SMB decision makers by alternative lender Nucleus Commercial Finance found that the expected default rate for small businesses, that is, with 10-50 employees, rises to 75 percent.

According to the latest figures from the British Business Bank, £ 79.3 billion was provided through the government-sponsored loan programs.

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“Government lending has been a vital lifeline in times of crisis, helping SMEs survive and recover from the effects of the pandemic,” said Chirag Shah, CEO of Nucleus Commercial Finance.

“However, based on these findings, the government will face challenges when defaults hit these expected levels and companies need additional funding to get through.

“Rather than leaving the SMEs that support our economy on the verge of survival, government and industry must now get in touch with them to provide them with continued support and point them to the solutions available.

“It is critical that government and industry work together to help SMEs move their funding from these loans to other funding sources over time.”

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Of the SMEs that have received a loan, nearly two-thirds (64 percent) have started repaying, 44 percent through their own income and 21 percent through a loan from another source, but over a third (34 percent) have t started to repay their loan.

This is made up of 17 percent who have taken repayment leave, nine percent who defaulted on the loan before repayment began, and eight percent who have not yet started repayment.

Companies that are most concerned about repaying the loan are sole proprietorships (30 percent), followed by 17 percent of medium-sized businesses (with 50 to 250 employees), four percent of small businesses (10 to 50 employees), and six percent of the micro-enterprises (one to nine employees).

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