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Indies wary of 'bounce back' loans

Independent retailers have cautiously welcomed the government’s new ”bounce back” loan scheme, but have raised concerns over taking on new debt.  

The new micro-loan scheme announced earlier this week by chancellor Rishi Sunak will enable businesses to access loans worth up to 25% of their turnover, to a maximum of £50,000. The government will pay interest for the first 12 months and will guarantee 100% of the loan. 

Available from 9am on Monday 4 May, the loans will not require forward-looking eligibility tests, but just a “simple, quick, standard” application form for businesses. The chancellor said the loans should arrive within 24 hours of approval for most firms. 

Although welcoming of further government support, independent retailers have voiced concerns over taking on debt in the face of an “unknowable” future. 

“If the speed of qualification and access is improved, this is definitely a good thing, as there are obviously critical cashflow issues in fashion retail at the moment,” said Victoria Suffield, owner of Winchester independent The Hambledon. 

”But it remains a loan, rather than a grant, and repayments in a future which is unknowable may prove very difficult for some businesses. The business loan scheme will undoubtedly help some companies who are in a fundamentally sound position and are able to plan for repaying but may mask underlying financial problems for other firms who may have been struggling before the pandemic.”

The government’s offer to pay the interest for the first year and to provide a 100% guarantee is positive for small business, Martin Brighty, owner of menswear independent retailer Peckham Rye told Drapers.

However, he also voiced concerns about debt: “It’s a debt an SME didn’t need two months ago. Businesses are expected to pay it back and I would expect usual chasing methods will apply if payments are missed. Debt led [support] is always a bad way, and personally I hope it’s not palliative care. 

“What the government could do is ensure that any chasing for non-payment is managed and that the bounce back is actually provided and not based on ‘usual lending criteria’”. 

Roo Cross, founder of north Cornwall-based womenswear independent Roo’s Beach praised the promised simplicity of the application process compared with previous coronavirus loans. 

“The whole process of the government providing loans should be really straightforward, easy to access, and with no tricky small print and conditions attached,” she said. “It sounds as though they’ve got the message.”

She added that she will consider applying for the loan: “We are trading well online. However, we have still suffered a considerable downturn in trade and we have no idea what the knock-on effect of this pandemic will be over the next few months.

“If the terms are favourable and help us to carry on weathering this storm, then I think it’s a very appealing proposition. 

“It will help us continue to invest in our online presence, keep new stock arriving and we are in the middle of developing an own-brand concept, which has had to take a back seat for a while. I’d like to carry on with this project.” 

Chief executive of Bira (the British Independent Retailers Association), Andrew Goodacre, told Drapers: “Moving forward retailers will need a combination of government support, luck and a lot of the creative, entrepreneurial flair that has always been part of successful retailing. 

He welcomed the loan and said it would provide independent retailers unable to access the Coronavirus Business Interruption Loan Scheme with “desperately need[ed] working capital as they prepare to open the doors of their shops as we transition from lockdown”. 

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