Bank lending decreases as CBILS and BBLS end

Outstanding bank lending to small businesses in the hospitality sector has fallen by more than £1.4 billion since the end of the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS). Overall Bank lending dropped to £14.6bn in April 2022, down from £16.08bn in March 2021, according to analysis by Hazlewoods.

There was also a 4.6% drop in bank lending to the retail industry in the past 12 months following the end of the Government-supported lending schemes, from £22.1 billion to £21.1 billion. Overall bank lending to SMEs fell 3.9%, from £216 billion in March 2021 to £207.5 billion in April 2022.

The study found that the Government’s new Recovery Loan Scheme (RLS) is markedly less generous than the CBILS and BBLS schemes it replaced, meaning banks are less keen to lend to SMEs through it.

Under RLS the Government no longer pays the first 12 months interest on behalf of businesses, nor the lender’s fees, while interest rates for borrowers have also risen. The Government guarantee to a lender is only 80% of the amount loaned to a business, making them significantly higher-risk for banks to write than under the 100% government-guaranteed CBILS and BBLS schemes.

Rebecca Copping, Associate Partner at Hazlewoods said “The Government’s new Recovery Loan Scheme is markedly less generous than the CBILS and BBLS schemes it replaced, noting that it is “much less attractive for banks” and warning that this “has impacted the level of risk they are willing to take.”

“SMEs planning for the end of their CBILS and BBLS loan terms may find that they struggle to refinance their debts at rates that work for them.”

“The Recovery Loans Scheme that has replaced CBILS and BBLS is much less attractive for banks – that has impacted the level of risk they are willing to take.SMEs planning for the end of their CBILS and BBLS loan terms may find that they struggle to refinance their debts at rates that work for them.”