A majority of small businesses (55%) that received the UK government’s Bounce Back Loan Program (BBLS), which was launched specifically to help those affected by the coronavirus pandemic, were used to “adapt and grow, “a new report revealed.
Research from Enterprise Nation and Starling Bank suggests that the BBLS has played a role “beyond mere survival in the face of the pandemic.” Enterprise Nation, which provides support and advice to small businesses, surveyed 850 of its members. Respondents were asked a series of questions about their borrowing, including BBLS, over the past year.
While a third (36%) of SMEs used their BBLS loan to pay their bills, 35% kept funds in reserve and 27% used the money to invest in their business.
This investment includes introducing new products and services (27%), introducing new technologies (13%), upgrading and retraining staff (13%) or increasing marketing efforts (24 %).
Small businesses can borrow up to £ 50,000 ($ 68,804) under the scheme, which was set up in May to help businesses struggling due to the COVID-19 pandemic. Bounce Back loans are 100% government guaranteed, which means taxpayers are exposed to losses and there will be no fees or interest payable for the first 12 months.
After 12 months, the interest rate will be 2.5% per annum. The system is open to applications until March 31, 2021.
The eligibility criteria, according to the government’s website, are that companies applying for the loan must be UK-based, established before March 1, 2020, and have been affected by the coronavirus.
Figures from the HM Treasury show more than 1.53 million Bounce Back loans have been approved since the inception of the program, with £ 46.5 billion loaned to small businesses, or around £ 30,000 per company.
WATCH: What is the Bounce Back Loan Program?
Among respondents, almost half (48%) said having the funds in reserve gave them peace of mind during a difficult time and / or gave them greater confidence to innovate, adapt or diversify. their business (36%).
Of the small businesses surveyed, 18% reported “significant growth” in the loan and 37% said the loan offered some return.
Emma Jones, founder of Enterprise Nation, said: “What this research shows is the resilience of small businesses. Although many took out a loan for the first time, they put these funds to good use. The money allowed them to confidently pivot, introduce new products and services such as online ordering systems or increase their e-commerce offering and improve their online marketing. “
“It must be a relief for the government to hear,” she added.
The study also indicates that interest in the government’s new payback loan program is high, with seven in 10 small business owners who have taken out a Bounce Back loan (70%) stating that they would consider applying, i.e. equivalent of one in four SMEs (25%).
The new program ensures that businesses of all sizes can continue to access loans and other types of financing up to £ 10million per business once existing COVID-19 loan programs are closed.
In December, UK bank bosses told MPs they were seeing Bounce Bank loan fraud rate about five times higher than normal.
The rough figure suggests fraudsters could earn up to £ 420million from the loans, which are 100% government backed. A senior manager at HSBC (HSBA.L) said the criminals were specifically targeting the program, including posing as suppliers of PPE.
And earlier in October, the government said it feared losing up to £ 23 billion on the Bounce Back loans.
The Ministry of Business, Energy and Industrial Strategy said loss rates on the coronavirus loan program could be between 35% and 60%.