According to UK Finance, over 1.5 million businesses have drawn on government-backed loans as nationwide coronavirus restrictions forced large parts of the service economy to a standstill.

Nationally, UK lenders have issued 229 BBLS and 10 CBILS facilities for every thousand businesses, with the number of loans approved dwarfing volumes seen in previous years as lenders met the increased demand for additional finance.

These schemes sit alongside a broader package support from lenders, including commercial facilities and invoice finance. Following the government’s extension of the support schemes in November, businesses that had already taken out Bounce Back loans for less than the maximum borrowing amount are able to apply for a ‘top-up’. UK Finance estimates that a further £600 million of lending has so far been accessed through this facility.

Loan approval volumes, across both government schemes and commercial lending, for all industries increased throughout Q2 and Q3, with retail, hospitality, travel, tourism and construction receiving particularly high levels of support due to the scale of the pandemic impact.

As a result, approval volumes exceeded 150,000 for construction and retail in the period, and 200,000 for the professional and support services sector. In previous quarters, all industries averaged fewer than 20,000 approvals.

Banking and finance industry support through government-backed coronavirus lending schemes, coupled with initiatives such as the Job Retention Scheme and the deferral of VAT payments, has significantly reduced SME outgoings in 2020, leading to a 20% rise in business deposit holdings over the first three quarters of the year – which now stand at a record £252bn.

SME finances have been further supported by the broader package provided by the sector, with businesses benefitting from a range of facilities provided by lenders, including extended overdrafts, invoice finance and capital repayment holidays.

With the focus of businesses firmly fixed on short-term replacement or preservation of trading cashflow, utilisation of overdraft facilities dropped from 54% in Q1 to 39% in Q3. This – coupled with record levels of deposit holdings – leaves substantial headroom for the future, allowing enterprises to draw down available existing facilities if needed.

Stephen Pegge, managing director of commercial finance at UK Finance, said: “2020 was a challenging year with the disruption of Covid-19 restrictions and uncertainty ahead of the end of EU transition. The UK’s banking and finance industry continues to support businesses of all sizes across the country to help them trade and invest for recovery.

“Gross lending in the first three quarters of last year was more than double the annual total in 2019, boosted by over 1.5 million businesses borrowing with government-guaranteed facilities totalling over £68 billion. SME financing was particularly in demand in the service industries, which were amongst the hardest hit by the pandemic.

“Approvals of overdraft facilities rose significantly at the start of last year but demand in the second and third quarters moved towards loans. SMEs can now ‘top-up’ their Bounce Back Loan to the maximum of £50,000 or 25% of their turnover if lower, with the application deadline for the schemes now running until the end of March 2021. This extension and the wider support of the industry will help businesses access the finance they need as the pandemic continues to affect the economy.”

He added: “While the business community in aggregate does not appear overindebted, with liquidity reserves and capacity to provide finance strong overall, many individual businesses and some specific sectors are facing significant and much more extended disruption and may find themselves in financial difficulty in 2021.

“In addition to the further grant support announced this week, widespread restructuring and recovery situations are expected. In response, the finance sector and related professional services are focused on the provision of capacity and expertise to help support the turnaround of companies where possible, while ensuring the sympathetic treatment of those businesses which are no longer viable.”