More than three times more businesses applied for financial support last year as they tapped into Government-backed Covid-19 support schemes, new figures have revealed, prompting calls for more support in paying back the debt.

In total 45% of small and medium-sized enterprises (SMEs) applied for financial support, up from 13% a year before, figures from the British Business Bank show, while gross bank lending was nearly £104 billion.

Between 2015 and 2019, annual gross lending never reached higher than £59.2 billion.

Around 1.6 million businesses have borrowed £73 billion

“The data speaks for itself,” the British Business Bank’s chief executive Catherine Lewis La Torre told the PA news agency.

It has left businesses with billions of pounds in loans that they will now have to pay off over the next decade, spreading the shock of Covid-19 across the period.

Around one in five businesses say they have spent none of their Government loan money, some of whom will likely pay back rapidly, contributing to a 20% spike in SME bank deposits, to a record high last year.

“This actually augurs quite well for the recovery, because assuming that those SMEs have the confidence to invest that suggests we could have quite a strong reaction on the other side as things improve as the vaccine rollout gathers pace and the end of this lockdown is in sight,” Ms La Torre said.

On the other hand, 23% of businesses say they have spent all the money from their loans, leading to worries about repayments.

“More than half of those with facilities say a student loan approach, whereby repayments are only made once a firm is profitable again, would mark a helpful way forward.”

The National Audit Office last year revealed estimates that between 35% and 60% of borrowers might default on their loans. That was a broad range, however more precise numbers are still some way off. The first payments are due in two months as the Treasury has been picking up interest payments until now.

“We’re a little bit further forward in terms of data today. But not that much further forward, I don’t think because what we need is the performance data before you can start to run through some assumptions as to the payback rate. And we’ll start to have that performance data coming in from May this year,” Ms La Torre said.

Recovery Loan Scheme

Some might go further into debt, with the launch of the Recovery Loan Scheme, which launches in April, promising loans of £25,000 to £10 million.

Some of the details of the scheme, which replaces the other programmes, including the 80% Government guarantee, have already been announced, however the interest rate that can be charged is still to be decided. It is widely expected to be considerably higher than the 2.5% charged on bounce back loans. CBILS loans stretched up to 15%.

British Business Bank data showed that uptake of the loans was higher in some regions of the north, where there were more restrictions during the autumn. The accommodation and food services sector was most likely to tap into the scheme, followed by the real estate businesses and wholesalers and retailers. Around 60% of all bounce-back loans were for more than 20% of a business’ turnover, the bank revealed.

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