“Bounce back loans and CBIL guarantees need to be increased now,” says tax advisory expert

Businesses have not been supported directly and now face a funding crisis, say leading tax and advisory firm Blick Rothenberg. Richard Churchill, a partner at the firm, says:

“As we approach the end of the second lockdown businesses need further support from the chancellor to bounce back. The chancellor has sought to protect jobs but has done little to support businesses directly and many face a funding crisis. On exiting the previous lockdown businesses used the bounce back and CBIL funding available to make themselves Covid secure, modify their businesses and buy stock, especially those focused on Christmas sales.

“With the second lockdown UK businesses no longer have any cash resources left to restart their businesses again. The Chancellor has simply extended the deadlines for application for bounce back and CBIL lending to 31 January and allowed businesses who borrowed less than the limit of £50,000 or 25 per cent of their turnover to top up. Most businesses have already drawn their maximum available funding under the bounce back loan scheme, so this is unlikely to yield any further funds for them.

“Businesses have many expenses in addition to salaries and are on a liquidity cliff edge of no additional funding, limited ability to trade and with 2021 on the horizon they know many their previously deferred tax liabilities will need to be started to be repaid.

“When the chancellor asks businesses to bounce back again he needs to enhance the current measures in place. For those businesses accessing the bounce back loan scheme, he should increase the limit of bounce back loans to either £75k or £100k. For those businesses accessing the CBIL lending scheme, he should increase the Government guarantee to 100 per cent on CBIL, borrowing of up to £250k and ask banks to recalculate affordability measures on borrowings based on the extended 10-year term for CBIL borrowings and allow businesses to increase their existing loans.

“Just increasing levels of debt for companies is not healthy for the businesses or the UK economy in the medium to long term. Business owners do not want to work to simply service debt and there must be an equitable split of value created in businesses supported by this additional borrowing between business owners and UK government.

“It had been hoped that the Successor Loan Scheme would start to provide these solutions but since its announcement and planned launch in January 2021 no further details have been announced and it must be assumed will now be deferred. If not, UK business would welcome news on longer term funding solutions.”