Parliament’s Public Accounts Committee has published a “withering” report* into the Bounce Back Loan Scheme (BBLS), put in place to help businesses through the height of the Coronavirus pandemic.
The report shows that, while the focus was on speed of delivery, the scheme has exposed taxpayers to potentially huge losses, estimated in the region of £15 billion to £26 billion.
According to the Department, the majority of these are credit losses, where the borrower wants to repay the loan but cannot, however Government lacks data to assess the levels of fraud within the Scheme. It also lacks data or measures to understand the economic benefit of the Scheme. In addition, HM Treasury is yet to agree the process and protocols that lenders are expected to follow in recovering overdue loans.
The key findings arising from the inquiry are:
- Government was not sufficiently prepared to support micro businesses despite the economic impact of the pandemic being a known risk.
- The Scheme was implemented with impressive speed but does not strike the right balance between supporting business and protecting the taxpayer.
- Shortcomings in the Scheme’s design have exposed the taxpayer to potentially significant losses.
- Government’s plans for managing risks to the taxpayer—from both fraud and borrowers who are unable to repay loans—are woefully under-developed.
- HM Treasury has not yet finalised the rules lenders need to follow to ensure overdue loans are repaid.
- Government has no apparent plans to measure the Scheme’s impact, including identifying how many businesses have been unable to access support.
Meg Hillier MP, chair of the Public Accounts Committee, said: “We all hope the Bounce Back Loan Scheme saves a significant number of Britain’s small businesses, who will play a key part in the economic recovery from this pandemic.
“But despite knowing that it was a case of ‘when’ rather than ‘if’ a serious pandemic hit the country, government didn’t develop plans for how to support the economy. Rushing to get money out of the door after the fact didn’t allow for analysis of how many businesses needed this help, could benefit from it, or could repay it.”
- Assess your debt – Get a clear understanding of the level of debt you are carrying, then calculate and analyse your debt-to-income ratio. This will demonstrate if you have enough working capital to continue servicing the debt and enable you to put a debt re-payment programme in place. Paying off your most expensive debt should be a priority!
- Increase cashflow – Recover overdue payments and put processes in place to manage the collection of your debtors. Consider what non-essential expenditure can be reduced or avoided now. Also look at what’s costing you the most and review your options. For example, ask yourself if your expensive office space is really necessary or could you downsize with some degree of home working likely to continue next year.
- Renegotiate payment terms – With landlords, suppliers and your bank, should you be concerned about meeting any loan commitments.
- Consolidate loans – Consolidating debt into a single low-interest loan is one of the fastest ways to lower your interest rates and pay down your debt quickly.
- Establish sound financial planning, monitoring and evaluation – Budgeting, forecasting and management reporting are also really important when it comes to managing cashflow and paying off your debt.
- Ask for help – Speak to a local business specialist for independent advice on cashflow, strategy and the most suitable options available to you to help you take back control of your finances. We have a debt advisory team in the group who can assist (cadenceadvisory.co.uk)