Tsunami of “Unsustainable” Business Loans to Hit Banks, City of London Grandees Warn | Wolf Street

Ironically, it is when the businesses begin to reopen that the strains will probably begin to show, particularly for companies that already had debt and/or cash-flow issues before this crisis began.

“It’s the classic symptom of over-trading,” says Duncan Swift, former president of insolvency trade body R3. “If there is a significant uptake in orders but a weakened capital base, that is when insolvencies will spike. The feeling is that it is three months off.”

In a recent survey of SMEs by the British Banking Resolution Service, 45% of respondents who have taken out a loan from a government business lending scheme say they may not repay it. Some industries are likely to be more exposed than others. According to RCG, the sectors most at risk of non-payment are property (representing 24% of the total estimated unsustainable debt), accommodation & food services (16%) and construction (11%)

Wolfstreet – https://wolfstreet.com/2020/06/10/tsunami-of-unsustainable-business-loans-to-hit-banks-city-of-london-grandees-warn/