Small businesses are having to seek advice on how to manage high levels of debt built up from government backed loans they acquired to stay afloat during the Covid-19 pandemic. A lot of these businesses are now being forced to consider liquidation to clear their unmanageable debt levels. It has been discovered that more than half of UK businesses are carrying toxic debt which they will struggle to repay over the next year.

Recently, at LCI Limited Company Insolvency, we have seen a massive increase in enquiries about insolvency for this reason. Small businesses are looking for options where they can manage their debts because they are facing unrealistic repayments. According to the Insolvency Service, there were 1,446 company insolvencies in September 2021, this was an increase of 100 just from August and staggeringly over 50% higher than the previous year. It is expected that by September 2022 this figure will be much higher than 2021.

The Covid-19 pandemic forced many companies to take government backed loans to survive. These loans are backed by a guarantee by the UK Government and this includes bounce back loans that offered up to £50,000 for small businesses during the pandemic. There is now £47bn in bounce back loan debt alone in the UK.

Businesses are now starting to discover if they can afford the repayments for these loans, as many have been repayment free and creditors have not been pursuing businesses for the repayments until now. Now courts are re-opening, this is starting to change and creditors are beginning to pursue businesses for their loan repayments. There is also a year's worth of deferred taxes for a lot of businesses and the HMRC will start to collect these now that furlough and other government support schemes have ended.

Some businesses that may particularly struggle with all these debts are businesses that have needed to close multiple times throughout the pandemic such as property businesses and those in the hotel, restaurant and bar industry. With much lower income combined with increased costs, these businesses have quickly become in a position where, not only can they not afford to stay afloat, they also have large amounts of debt to pay back.

This month, the Bank of England warned that many companies who took out emergency loans were now at risk of collapse. As government support starts to fade away, business insolvencies are expected to increase to an all time high level. The Bank Of England interest rates rising will also see many businesses in trouble as many repayment rates were not fixed for those using the Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme. This will see repayment amounts rising to unrealistic and unaffordable levels.

If your business is in trouble and struggling to afford loan repayments and you would like to find out if Insolvency would be the right option for you, then you can fill in this online form. An adviser from LCI Limited Company Insolvency will call you back today to offer free advice and discuss your options. 

If you are looking to wind-up your company but are worried about the cost, there are now options to spread the cost making insolvency a much more affordable option.