Association warns of ‘rising tide’ of dept in Self-Employed sector as Bounce Back Loans finish

Image credit: Philip Veater (Upsplash)

As the BBLS (Bounce Back Loan Scheme) closes, the Association of Independent Professionals and the Self-Employed (IPSE) has praised it for the help it provided for the self-employed – but also warned of a “rising tide” of debt in the sector.

The BBLS was designed to enable businesses to access finance more quickly during the coronavirus outbreak. On 31 March 2021 the scheme was closed to new applications and applications for top-ups.

IPSE research with Starling Bank suggests one in ten freelancers (10%) took out a Bounce Back Loan, while one in four (23%) took on credit card debt and one in seven (14%) had to go into their overdrafts to get by during the pandemic.

Andy Chamberlain, Director of Policy at IPSE, said: “The BBLS has been a vital lifeline for many freelancers – and its generous repayment time is welcome. At the same time, however, government must pay close attention to a rising tide of debt in the self-employed sector.

“For many freelancers who could not access the Self-Employment Income Support Scheme (SEISS) – such as the newly self-employed and limited company directors – BBLS were the only way to keep themselves afloat. And, as our research has shown, many others – particularly those who struggled with the tightening eligibility criteria for the schemes – have taken on major debt from traditional forms of borrowing such as credit cards and overdrafts.

“As the Government prepares its Recovery Loan Scheme, we urge it closely monitor the level of debt in the sector – and not only ensure leniency from lenders, but also be ready to step in to reduce the strain on freelancers in the coming months and years.”

BBLS was available through a range of accredited lenders and partners. A lender could provide a six-year term loan from £2,000 up to 25% of a business’ turnover. The maximum loan amount was £50,000.

The scheme gave the lender a fully 100% government-backed guarantee against the outstanding balance of the facility (both capital and interest), but the borrower always remained fully liable for the debt.

The Treasury’s final monthly update on its emergency loan schemes – the BBLS, Coronavirus Large Business Interruption Loan Scheme, Coronavirus Business Interruption Loan Scheme, and the Covid Corporate Financing Facility – show that more than 1.6 million firms benefited from support to keep them trading and protect jobs and livelihoods.

In total, these schemes have provided almost £180billion worth of lending to date, supporting over a quarter of businesses in the UK.