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Banks prepare to collect billions in COVID loans

14th April 2021

Millions of businesses across the country will soon be required to repay their banks after some of the largest lenders started writing to firms to commence the recovery of emergency COVID loans.

It’s estimated that around £75 billion in COVID support loans have been issued to some 1.6 million companies by banks in the UK over the past year.

These were made available through the introduction of the Bounce Back Loan Scheme introduced in April 2020.

However, as new applications under the scheme were closed at the end of March, banks such as HSBC, NatWest, Barclays and Lloyds have started to inform borrowers that payments towards these loans will commence from the end of April.

Additionally, it has been reported that banks have formed specific recovery teams to deal with the reclamations and filled them with a large cohort of new staff to help with any debt-related interactions.

Industry leaders have warned the government that businesses will not be in a position to deal with the repayment process when it hits them.

Indeed, whilst some retail, hospitality and leisure businesses will now be able to resume trading after months of lockdown restrictions, they will certainly not be able to get back on their feet in April. Certainly, businesses across all sectors have been sorely affected by the pandemic, with many requiring months of profitable operations before debt repayment could be comfortably accommodated within cashflows.

However, it is believed that banks may take an aggressive approach to the recovery of the debt, predicting that businesses may do what they can to defer payments until a more stable time.

Ultimately, the government may struggle to provide further protection to UK businesses and, unsurprisingly, banks will be extremely reluctant to entertain any sort of extension to the interest-free period beyond the agreed 12 months. Though they must be aware that popular opinion may direct the government to start pushing for exactly that.

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