Recent figures suggest businesses have taken c.£18bn of CBILS and c.£42bn of Bounce Back Loans this year. This is on top of any other funding that businesses have taken.

Whilst these government schemes have been welcomed by businesses that needed funding to survive the COVID period, it does mean these businesses are now burdened by debt they did not want to take, but will have to pay back.

As a result businesses will see a double whammy of a dent to their performance, so their profits will be lower and there will be a less positive cashflow, and they will have taken on debt that needs to be repaid, further impacting cashflow.

Every business has a maximum debt capacity based on its performance, its profits and most importantly its cashflow. This capacity will have been impacted by lower profits and cashflow and then the debt repayments to be made.

The loan repayments on these BBLs and CBILSs will be included in the normal way when calculating the ability for a business to borrow and repay money, and therefore many businesses which had growth plans, and looked to borrow to support this, will suddenly find their debt capacity used up on this lending, they did not want, but needed to take.

It is therefore important to consider this and assess how this may impact plans going forward. Plans may need to be changed, different types of funding may be required and/or a complete review of funding strategy in terms of the future.