CBILS & BBLS – What Is The Default Rate?
Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme. The main two schemes offered by Government to support businesses during the Covid period.
Whilst CBILS was assessed by lenders (sometimes loosely), the BBLS was almost sanctioned without assessment. What happened afterwards was always going to be interesting to see, would the loans be repaid? Would the default rate be as high as many feared?
Given the unique circumstances of the pandemic and the rapid implementation of the schemes, default rates were a topic of interest, but official data has been slow to become available.
As of September 2021:
- CBILS – 88% of loans are in order, 11% fully repaid and around 1% are in default or arrears
- BBLS – 4% have been fully repaid, around 9% are in default or arrears
As of September 2023
- CBILS – 2.82% are in default or arrears, 2.9% have been written off as bad debt
- BBLS – 7.88% are in default or arrears, 12% have been written off as bad debt
But, what makes this interesting?
The Lender Split
There is a real disparity on the default rates across different lenders. You can read this two ways:
- Good practice from some lenders and solid underwriting has prevented losses
- Underwriting was too harsh, lack of support to businesses and those same firms had to go elsewhere
There is a lack of any real clarity on default rates, however if we take the amount outstanding at each lender and then compare that to the amount of the loans they have written off (or claimed back from the Government) we get this as a percentage of ‘bad’ loans:
- Barclays 4.2%
- Funding Circle 3.6%
- HSBC 4.5%
- Lloyds 6.5%
- Natwest 2.8%
- Santander 3.2%
- Starling 24%
We cannot ascertain why these loans failed, however the bad debt ratio at Starling stands out and may reflect use of the BBLS scheme and fraud, it may also reflect difficulty in obtaining borrowing from the high street lenders and those businesses going elsewhere, we may never know.
If we exclude Starling then we would reasonable expect the high street lenders to be akin to each other. Given these are the volume lenders, the difference between Lloyds and Natwest would suggest it was much harder to get finance from Natwest than it was from Lloyds.
Perhaps the biggest learning point is that when you roll out a single Government scheme and the rules are the same for all lenders, then so should the underwriting process be otherwise you get businesses struggling to survive due to who they bank with and that’s not fair.
The lesson for business borrowers? Spread your relationships and treat lenders as any other supplier. Keep your options open and raise finance before you absolutely need to.
PS – We can help you with this.
By Dave Farmer