Close to £2bn was loaned to small and medium sized businesses in Northern Ireland over the last 10 months as part of two Covid-19 support schemes.
ut there are now concerns over the ability of some of the thousands of small companies to repay the debt, with many interest and repayments set to kick in at the start of April.
Just over 1,500 businesses here were loaned close to £500m under the business interruption scheme, while 35,000 small and micro firms took on £1.3bn in bounce back debt.
The repayments are due as the furlough scheme and rates relief end, while businesses also deal with tax liabilities.
“It is a multi-faceted cash flow cocktail and is really going to be a challenge,” warned Michael McQuillan, chief executive of Enterprise NI, which has advised tens of thousands of mostly micro-businesses on Covid-19-linked issues over the last year.
Half of nearly 4,000 small businesses canvassed recently reported “very weak cash flow” with an average working capital for no more than six weeks amid the continuing restrictions, Mr McQuillan said.
“And extended restrictions are creating great concerns,” he added.
Micro businesses, including one person operations, and small and medium sized firms were able to apply for either a Coronavirus Business Interruption Loan (CBIL) of up to £5m or a Bounce Back Loan (BBL) of up to £50,000. The loans were handled by banks but guaranteed by the Government.
Across the UK, just over £20bn in interruption loans were taken out by 87,529 businesses, while bounce backs worth £44.74bn were secured by 1,471,001 firms.
Some repayments and interest were due on the interruption loans over the course of the year, but the latter was crafted so that repayment and interest was put off for a year.
The interest rate on the bounce back loans is a “generous” 2.5%, said Mr McQuillan, while changes have been made to introduce a “pay as you grow” system for bounce back debt and encourage lenders to stretch interruption loans from six to 10 years.
“It has been a lifeline that have kept businesses afloat… but this is debt that 10 months ago businesses did not think they would need,” said Mr McQuillan.
“This is an additional debt that very few of this businesses can afford.”
In its survey, Enterprise NI was told by 41% of these small and micro businesses that there “grave concerns” about their ability to repay.
John Glen MP, economic secretary to the Treasury, in a parliamentary answer, said: “Any business concerned about their ability to repay their finance should discuss this with their lender in the first instance.”
He added in response to a question from Foyle MP Colum Eastwood: “Given loans under CBILS are varied and resemble more traditional commercial lending, CBILS borrowers are more likely to benefit from tailored engagement with their lender if they have concerns about repayments.
“Lenders have an ongoing relationship with CBILS borrowers and will be best placed to provide support tailored to an individual businesses circumstance.”
Economy Minister Diane Dodds yesterday reminded small businesses her department has a number of grant schemes where money is still available.
Limited company directors and newly self-employed can apply for one-off taxable grants of £3,500, but the deadlines for both are next week.
The Covid Restrictions Business Support Scheme helps businesses directly impacted by Covid regulations, with grants of up to £800 available each week the restrictions are in force.
The Bed and Breakfast, Guest House and Guest Accommodation Support Scheme provides financial support ranging from £1,000 up to £12,500. It closes today at 5pm.