Covid loans have been a lifeline – but how easily can businesses repay them?


Government guaranteed loans taken out during Covid have proven to be a financial lifeline – but how easily can stricken businesses repay them?

For many UK small and medium-sized businesses, government-guaranteed loans taken out during the pandemic have proven to be a financial lifeline. But like any loan, they now need to be repaid and some businesses need to make repayments even though foreclosure restrictions have not yet been fully lifted and trading has not returned to normal.

Last week, The Mail on Sunday spoke to owners of three small businesses who have secured loans to help them weather the pandemic. As we report, some fared better than others.


Amber Leach started her wedding photography business, Liberty Pearl, in Plymouth eight years ago. Until the pandemic hit, things were going well – the annual turnover was in six figures and she employed six photographers who did everything from taking pictures of the big day itself to honeymoons, to running away. and even at weddings abroad.

Mixed image: Amber Leach’s photography firm (right) is booming, while Loc Bui has closed its restaurant and set up online cooking classes

But when Covid struck, Amber lost 80% of her business overnight and had to pay back £ 18,000 to the bride and groom who had already booked with her.

“I was in deep trouble,” she said with some understatement. While she was able to secure a one-time grant from her local council and keep money by running online business strategy classes, she had no choice but to take out a loan of £ 10,000 and then an additional advance of £ 7,000.

The terms of the loans meant that she did not have to make a repayment for a year. “The money they gave me was there as a financial backing because I didn’t know how many other clients I had to pay back,” says Amber.

But now that most wedding restrictions have been lifted, her business is booming – she has 18 months of work to do over the next four months.

Fortunately, Amber is in a good position to start paying off her loans. She said, “I am confident about the loan repayment, but who knows what will happen in the future?”


Katie Owen started her wide shoe retailer Sargasso and Gray seven years ago, while working full time in the wealth management industry. But in 2018, she decided to take the plunge and run her business full time.

“I never could find shoes that were wide enough and stylish enough for me, so I thought I would start designing and selling them myself,” she says. She focused on wide shoes for elegant occasions like weddings.

That meant sales slumped when weddings and other big events were called off in April 2020. Indeed, Katie ended up having more returns than sales. Taking out a £ 25,000 Bounce Back loan was “awesome, a real lifeline,” she says, and was “a way to get a cheap financial buffer because I just didn’t know for how long. the dire situation was to last ‘.

The extra money was put to good use when Sargasso and Gray expanded its product line to include wide sneakers and flats. As a silver liner, Katie, from Ealing, West London, is now seeing her client base grow, as people who would not normally have bought online are now much more comfortable doing so. . “I took the loan repayment vacation because I wasn’t sure what things looked like when I started getting loan repayment notices,” she says. “It was a scary time and I was wondering if the business was going to survive, but I’m a lot more confident now. From adversity comes hope.


Paula Cooper and her partner Loc Bui had run their popular Vietnamese restaurant in Ilkley, West Yorkshire for 16 years until Covid finally did it for them.

Paula said: “We struggled throughout the blockages because we had to shut down all the time. Even when we were able to open, we were just breaking even. All the time, we had our fixed costs to pay.

Despite government grants and a £ 50,000 return loan, the couple made the difficult decision to shut down for good in January this year. “It was a very difficult decision to make, but it was the right one,” says Paula. “Companies like ours took out loans thinking we could start trading normally soon, but it just wasn’t possible for us.”

Now, the couple have launched Loc’s Taste of Vietnam online cooking school, which is already attracting favorable reviews from fans of Vietnamese cuisine.

But they still have to deal with the £ 900 monthly repayments of their Bounce Back loan – as well as prepare to pay a £ 35,000 tax bill. “I know we can delay paying off the loan,” says Paula, “but we just want to get it done as soon as possible, move on and focus on making our new business successful. ”


Launched in May last year, the government-backed rebound loans have allowed businesses to borrow between £ 2,000 and £ 50,000 (up to 25% of turnover).

Over 1.5 million loans have been issued, worth £ 46.6 billion. Refunds don’t start until after 12 months, but under the Pay As You Grow program announced in September, companies have several options:

1. Apply for a loan extension of six to ten years, at the same fixed interest rate (2.5 percent).

2. Reduce monthly payments for six months by paying only interest, an option that can be taken three times.

3. Take one-time repayment leave of up to six months. Businesses should contact their lender to trigger any of these options.

Coronavirus-related business interruption loan programs were launched in March last year and were 80% guaranteed by the government, which paid interest for the first 12 months.

Repayments begin after 12 months, and some lenders allow borrowers to extend the original term from six years to ten years.

Bounce Back and Coronavirus Business Interruption loans are now closed to new applicants.


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