Due to the corona crisis, especially among self-employed and SME entrepreneurs, the pile of unpaid bills is getting higher and higher. Due to the constant postponement of payments, debts are accumulating and many entrepreneurs will run into serious payment problems in the coming period. The Royal Association of Bailiffs (KBvG) and the Association for Debt Relief (NVVK) are therefore predicting a huge wave of collections.
From procrastination comes procrastination
Many of these entrepreneurs have been able to take advantage of payment breaks from banks and tax deferrals in recent months. However, this does mean that the mountain of debt is getting higher and higher and it is becoming increasingly difficult to repay these debts at a later date. According to Paul de Otter of the KBvG, “procrastination is the only possible solution you can think of”. Especially in times of crisis, when less money is already coming in, it is almost impossible to repay everything. Hence, businesses that survive the crisis will suffer for a long time. Entrepreneurs are expected to be able to avail of the various schemes until 1 April 2021. However, as things stand, entrepreneurs will have to start repaying the arrears from 2020, in 36-monthly instalments as early as July 2021.
Non-traditional group makes biggest income drop
In an interview with BNR, Paul de Otter says it is striking that debts are rising much faster among affected self-employed and SME entrepreneurs than among the lowest income brackets, where debts are normally higher. “This is because this non-traditional group has the biggest income drop. In particular, entrepreneurs in the hospitality, entertainment and now retail sectors lose a lot of money. In the case of people on benefits, on the contrary, income remains level.” In addition, the NVVK reports that entrepreneurs, who were already in bad shape before the corona crisis, have made massive use of the deferral schemes and therefore foresee major problems for these weaker entrepreneurs.
Record low bankruptcies
Despite the crisis and sharp economic contraction, the number of bankruptcies has never been as low as in 2020 in the past 20 years. The brake on insolvencies, as mentioned earlier, is mainly due to the government’s emergency support to compensate businesses. The Temporary Emergency Employment Bridging Measure(NOW) and other business support has reduced the number of bankruptcies by 16 per cent compared to 2019.
Record number of business closures
However, the record low did not apply to all sectors. On the contrary, in heavily affected sectors such as the hospitality industry and the ‘culture, sports and recreation’ category, the number of bankruptcies rose by 13 and 25 per cent respectively. In addition, according to ABN AMRO, the number of bankruptcies by no means represents the total number of business terminations. Many companies ended their business in 2020 without having to file for bankruptcy. The exact number of business terminations is not yet known, but the first three quarters point to an increase of 18.6 per cent. With an equivalent increase in the last quarter, more than 136,000 businesses will have terminated by 2020. This is a record number since 2013. Given the situation, the record low of bankruptcies will be short-lived. Research by the Association of Credit Management Companies (VCMB) shows that during the previous crisis, unpaid bills were the biggest cause of bankruptcies. A quarter of all bankruptcies then were due to non-payment.
Source:
BNR & ABN AMRO
