How to get your business out from under the COVID-19 debt mountain
Growth businesses face owing £105bn in debt because of COVID-19. Angus Grierson, Managing Director of LGB Corporate Finance, shows the various ways you can escape the debt mountain.
What does the COVID-19 debt mountain look like?
The pandemic has resulted in an unprecedented COVID-19 debt mountain for SMEs and mid-market companies, with recent estimates reporting this could exceed £105bn by March 2021.
To help struggling companies, the government has introduced two main stimulus initiatives: the coronavirus business interruption loan scheme (CBILS) and coronavirus large business interruption loan scheme (CLBILS), with the latter aimed at larger companies.
While these measures are laudable and necessary, there is a fear many of the resulting government guaranteed loans will be unsustainable.
According to TheCityUK, £36bn in Covid-19 emergency loans to small businesses are at risk of turning toxic. To make matters worse, even before the crisis, UK SMEs faced £23.4bn in late payments, creating a vicious cycle as the pandemic struck.
To address this challenge, TheCityUK has established a Recapitalisation Group (RCG) which is working to understand and identify mechanisms to support the recapitalisation of UK businesses which have needed to take on additional debt in response to Covid-19. On June 8, RCG published an interim update that set out the scope of the challenge, considers the sectors most likely to need support, explores how private sector capital could be mobilised and identifies gaps that could remain for the public sector. It also discusses key challenges for any proposed solutions to ensure they work for business right across the UK. RCG then plans to publish final recommendations in July.
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