Receivership during the COVID-19 era: Why September 2021 could prove pivotal for lenders
We’re about to encounter a watershed moment in the pandemic’s evolution…
At the end of this month, September,the furlough scheme will finally conclude.
By then, it will be 18 months since the government first launched this strategy to help prevent widespread unemployment as the threat from Covid loomed large.
And it’s entirely possible that many salaries will have been subsidised throughout this entire period.
If the furlough scheme is not extended, employers will be left to decide whether furloughed employees are retained or made redundant.
To put the significance and scale of this scheme in context, it’s worth noting that 1.84 million workers were still on furlough at the end of June 2021.
The wind down of the furlough scheme undoubtedly represents a step towards ‘normality’ in the labour market, but it also will mean big income losses for many of those who end up unemployed unless they are swiftly able to find alternative employment.
Let’s state the obvious – the ending of this scheme combined with the phased conclusion of the mortgage payment holiday are also likely to impact both the ability of tenants to pay their rent and property owners to meet their loan repayments.
And then there are the government’s Bounce Back Loans to consider…
When the two headline coronavirus loans for businesses – the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) – were launched in spring 2020, repayments on both were deferred for 12 months.
That means that many repayments have either recently started or will start soon for many applicants.
The reality of running businesses post-Covid 19 could be about to bite for many companies.
Given all the economic uncertainty that remains, it now seems inevitable to me that defaults will increase, whether this is arrears on payments or due to the expiry of the loan term.
Whilst the appetite to lend remains high within the specialist finance market, loan-to-values may struggle to meet outstanding debt figures, with borrowers unable to raise the funds to cover shortfalls.
This, in turn, has the potential to prevent refinance exits from progressing.
It’s entirely possible that September 2021 could ultimately prove a pivotal moment for lenders.
But as we enter the next chapter of this unprecedented Covid-19 era, there remains much that can be done when it comes to default loans.
Decisive action needs to be taken at the earliest opportunity, particularly as the expected backlog of possession claims could take a considerable amount of time to subside.
In my experience, engagement and negotiation with borrowers is paramount to mitigate this situation.
In conclusion, this watershed moment in the pandemic’s evolution has arisen at a time when it’s imperative for lenders to ensure that they’re able to use their own funds to relend at rates that are most advantageous to them.
CG&Co has consistently achieved this for our clients throughout the past 18 months – and we fully intend to keep doing so.
Daniel Richardson, is a Partner and Property Receiver at CG&Co. Founded in 2012, CG&Co specialises in Property Receivership and has the expertise to deal with default customers and return funds to lenders as swiftly as possible.