Companies have borrowed more than £70 billion in Government-backed lending, during a year since British businesses were given their first loans lifelines through the Covid-19 crisis.
Final lending figures for the Treasury loan schemes known as bounce back loans (BBLS), and two business interruption schemes (CBILS and CLBILS) are still not due until later this year.
The schemes have proved vital for many of the 1.6 million bosses that needed to pay daily expenses or even put food on their own tables.
But when the pandemic began businesses panicked as customers stayed away.
“A year ago we just didn’t know what was going to happen … there was a few weeks of absolute fear, the world had ended,” said Michelle Ovens, the founder of Small Business Britain.
Early on ministers bet on CBILS, which launched on March 23, hoping it could funnel enough money to businesses.
But they soon realised it would not be enough. The £1.2 billion that the Chancellor initially said would be available in Government-backed lending proved far off the mark, and money was taking too long to reach firms.
The answer was BBLS, launched in early May, which promised a 100% Treasury guarantee, less paperwork and a flat 2.5% interest rate, compared with CBILS, which provided an 80% guarantee and up to 15% interest.
That was when money started flying out of the door. Barclays got 200 applications in the first 60 seconds after BBLS launched.
Within seven days, bounce back loans for £8.4 billion had been approved. CBILS, which had been running for one and a half months at that point, had only approved £6.1 billion.
“CBILS just didn’t work for small businesses … there was so much paperwork and the minimum requirement for it was too high for the vast majority of businesses that needed help,” Ms Ovens said.
She added that despite some teething problems: “Bounce back loans saved business. Hundreds of thousands of businesses wouldn’t be here today if it wasn’t for bounce back loans.
“We went from CBILS, which was hard to apply for, required loads of information, was not accessible to small businesses, to ‘sign this piece of paper and have some money’.
“It was incredible and a massive relief for a lot of businesses.”
However, while speed and simplicity was the BBLS’s greatest asset, it also proved to have downsides.
With limited time for checks, and with the Government promising to cover 100% of any losses, banks lent to many businesses that will probably never pay back their loans.
Even a year on, estimates of how much BBLS will cost the taxpayer are just guesses.
A preliminary official estimate is that businesses might default on between 35% and 60% of their loans, or up to around £27 billion.
However, Peter Tutton, a fraud expert at corporate investigations firm Kroll, warned against reading too much into early estimates.
“Until you start investigating these, it is very difficult to have an indication as to what the expected loss and the expected fraud rate is. I think it is pretty much a finger in the air at this stage,” he said.
Estimating the BBLS losses is particularly hard as firms did not have to start paying back for 12 months, meaning the first payments are not due until May this year.
In this March’s budget, the Treasury set aside an extra £100 million to crack down on fraud in the support packages, including the furlough and self-employment schemes.
However, the fraud investigators will face some challenges tracking down individual cases of fraud among the 1.5 million borrowers, Mr Tutton said.
He said that matching tip-offs and evidence of fraud from the furlough scheme with borrowers provides leads for investigators.
HMRC also has other data, including tax returns, that can be used to track down suspicious patterns.
However money that HMRC is looking for could be long gone before suspicions are raised.
“The two key risks here are that the money is already gone … and trying to look at specific cases in isolation,” he said.
Banks hope the risk of fraud in the BBLS may have been overblown. They largely only lent to businesses that had borrowed from them before, meaning checks had been done in the past.
Another problem is posed by firms that have not received money or those for whom the loans were not enough.
According to British Business Bank data, about one in four companies have already spent every penny of the bounce back loans they took, implying money is tight.
Conversely, a fifth of companies have not spent any of the loans. It points to a dual-track exit from the economic shock as some firms will have money to spend to ensure they sprint off the starting line.
For those who have used up the loans, the Government’s new Recovery Loan Scheme might offer some help.
Although nowhere near as generous and easy to get as BBLS, the recovery loans can pay between £25,000 and £10 million.
But interest rates and other terms, including eligibility, have not been released yet, prompting concern from some businesses.
“The current Covid lending schemes end at the end of this month, but companies remain in the dark on funding options and are extremely worried about their cash flow situation,” said Richard Churchill, a partner at advisory firm Blick Rothenberg.