“We support Chancellor Sunak’s move towards providing SMEs with more flexible loan repayment terms for the Bounce Back loans scheme. This move will surely be received positively by those SMEs struggling to start repayment whilst the UK economy remains in lockdown.
While this is a welcome announcement, the Chancellor should consider further support for SMEs with flexible payments based on SME revenues. Based on Liberis’ data over more than a decade providing SME financing solutions, we know that revenue-based repayment can reduce default expectation by half.
Revenue-based repayment for business loans and financing is loved by small businesses. Revenue-based financing offers businesses payment terms that align with their fluctuating or seasonal revenues.
We recognise that flexible repayment will only matter for some loans. It won’t make much of a difference to the high amount of fraudulent Bounce Back loans taken out, which the National Audit Office in October estimated could be as high as 25-40% of £45bn in loans provided.
The next question is whether banks, who have dished out 99% of Bounce Back loans, have the capability and resources to implement such a repayment scheme.
Liberis offers UK banks help to support their SME customers through our embedded business finance platform which empowers daily payments linked to cash flow automatically based on a small fixed percentage. The Liberis technology platform can support banks and other partners by providing them with an automated platform that can embed revenue-based payments into their offering.
Chancellor Sunak’s move should be welcomed for the UK economy, SMEs and banks. Customers win as they don’t have to worry about bulky monthly repayments. Banks win by being able to recover the loans they backed. The UK economy wins as we lower the cost of default and help more SMEs survive.”