Recommendation 16

After the initial interest-free period, borrowers will need to make repayments (capital and interest) to the end of the loan period, in line with their loan agreement.40 There is a high likelihood that some businesses who wish to re-pay the loans will simply be unable to do so. UK Finance informed us that TheCityUK Recapitalisation Group estimates between £20 billion and £23 billion of ‘unsustainable business debt’ is expected to stem 32 Qq 57, 58 33 Letter of 3 November 2021 from the British Business Bank, para 4] 34 Q 61 35 Q 61 36 Q 24 37 Q 39; C&AG’s Report, para. 3.13 38 Qq 38, 40 39 Q 42 40 C&AG’s Report, paras 20–21 12 Covid-19: Bounce Back Loan Scheme from all UK government guaranteed lending schemes. And there are further cashflow demands for businesses on the horizon including: VAT and other taxes which have been deferred; loan repayment holidays; and interest free periods ending. Thus, Government expects that many SMEs will struggle to pay back what they owe when payments are due.41 The Department explained to us that when a borrower does not repay the loan, this will appear in their credit history and affect future borrowings.42