COVID-related debt “casts a long shadow over Scotland’s small business community”, and banks must offer “as much flexibility and support as possible”, the Federation of Small Businesses has warned.
The FSB noted more than £4 billion of government-backed loans had been provided to businesses of all sizes in Scotland amid the coronavirus pandemic.
Putting this into context, it added that the latest official statistics showed around £1.3bn of Covid grant support had been delivered to businesses by the Scottish Government through councils.
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A spokesman for the FSB said: “Given the sheer number of loans and number of small businesses, it is very likely that the vast majority of the borrowers are smaller.”
The FSB noted its analysis of government-backed coronavirus business interruption loans and bounce back loans showed “the proportion of overall loans in each of Scotland’s local authorities matches closely their respective share of Scotland’s population”. It concluded this showed “businesses across Scotland have been hit hard by the crisis”.
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Businesses in Glasgow have borrowed £630m through these loan schemes. Highland businesses have borrowed £205m. The FSB estimated government-backed debt has been taken on by around one in four Scottish businesses, with 99,792 loans offered to firms and 356,550 businesses in total north of the border.
Andrew McRae, FSB Scotland policy chair, emphasised “many firms that took out government-backed loans were not regular bank borrowers”.
He said: “Therefore, the banks need to offer these [firms] as much flexibility and support as possible in the recovery phase.”
Mr McRae believes “feedback so far suggests the banks are rising to the occasion”. He said: “If businesses are going to pay down their loans while growing the economy, they’ll need governments in Edinburgh and London to ensure the wider trading environment gives them the best chance.”
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