UK business loans written off almost doubles

The new findings from the independent debt advisory firm found that business loan write-offs increased from £190m in the third quarter of 2021 to £356m in the final quarter of last year. 

Covid led to write offs being subdued but they’re now rising as businesses struggle with inflation, including soaring energy prices and higher interest rates. This coincides with the end of the government-backed lending schemes that have made it harder for companies to roll over or refinance loans that are maturing.

The rise in business loans being written off comes as 12,634 companies went insolvent in the last quarter of 2021, nearly four times as many as the previous quarter. 

According to Altenburg Advisory, with business profits suffering from cost inflation, more will be in danger of breaching the terms of their loan agreements, where those covenants are based on the profitability of that business. A breach of these covenants may lead to a lender demanding repayment before the agreed maturity date.

As such, it says firms need to talk to their banks as early as possible if they think they may breach any of the covenants of their agreement, with banks starting to undertake more stress testing on new borrowers.