It has now been a number of weeks since the Chancellor of the Exchequer, Rishi Sunak, stood in front of the nation and outlined the government’s plans to support the majority of the UK’s businesses during the coronavirus pandemic.
In this guest article, Paul Atkinson, Director at Finance 4 Business discusses everything you need to know to navigate the CBILS application process.
The pandemic has brought with it many problems, especially for smaller businesses across the country. Drops in sales, cashflow and supply chain disruption have all been raised as key concerns for small businesses affected by the coronavirus. According to research by Opinium, 82% of small and medium business owners are concerned about the impact the coronavirus will have on their business. With over 5.7 million small and medium businesses across the country, the government needed to react quickly to provide increased access to much-needed financial relief.
The government has recognised the importance of supporting small and medium sized businesses across the country and has taken action in the form of launching the Coronavirus Business Interruption Loan Scheme (CBILS).
As part of a wider package of government support for UK businesses and employees, the scheme has been designed to support businesses that were performing well prior to the pandemic and would have otherwise represented a sound borrowing proposition.
Given the high demand for funding combined with heightened levels of business anxiety, the government has repurposed the existing framework for EFG in order to increase the efficiency and speed of the CBILS development.
However, since the initial launch of the CBILS, the framework has been recently expanded with changes to the scheme’s features and eligibility criteria. These changes mean that an increased number of smaller businesses across the UK impacted by COVID-19 can gain access to the funding that they need. Businesses must still display a good borrowing proposition, but security obligations can be relaxed, as insufficient security is no longer a condition to access the scheme.
Operated via over 40 accredited lenders made up of high-street banks, challenger banks, asset-based lenders and smaller, specialist local lenders, businesses can receive access to funding of up to £5million in the form of term loans, overdrafts, invoice finance and asset finance. The scheme provides the 40+ lenders with a government-backed guarantee against 80% of the lending, reducing the lenders exposure to 20%. The borrower, however, remains fully liable for the debt.
Problems with the application process
Any application process can be frustrating, but they are necessary, and for CBILS, unavoidable. However, it is becoming increasingly apparent that many businesses are experiencing a number of issues with the application process and struggle to navigate through the 40+ different lenders that are providing the funding.
To add some context as to why SME’s require the much-needed help and guidance with the CBILS process, the latest figures make for some grim reading. At the time of writing, 6,020 firms have borrowed a grand total of just £1.1bn since the scheme has been open.
In addition, there is currently a massive gap between the number of enquiries for CBILS, estimated at over 300,000, and the 28,461 actual applications that have reached the lenders.
Evidence now highlights that the issue businesses are facing is the ability to navigate their way to the right lender from the onset and knowing how to maximise their chance of success.
Not only this, there has also been increased concern surrounding government advice. According to Opinium, almost two in five businesses believe that the government’s guidance has been unclear, with senior decision makers unsure where they can gain relevant and timely advice.
Navigating the CBILS application process
If like many other businesses across the country, your company is currently going through financial difficulty, you may be looking at the funding options for the first time.
At a time of heightened anxiety, it’s important that you reduce as many stresses as possible, especially when it comes to your business. Your first step is to work out if CBILS is applicable to your business, what your general finance options are and what application processes can support you.
Regardless of your preferred lender, you are also likely to need to prepare a range of documentation. This includes ID, POR, personal ALIE, 3-year financial accounts, 6-month business bank statements, up-to-date management information and cash forecasts for 2020. Preparing this in advance can further simplify your application process.
You may also be unsure of how long it will take to obtain a loan. Each accredited lender has it’s own process and criteria, however they are aware that small businesses need access to the funding as quickly as possible.
Many businesses are going directly to their current bank while others may not know where to turn if their existing bank is not an accredited lender. In both cases, we would suggest going through a specialist financial brokerage such as Finance 4 Business, where your application will be managed carefully with advisers helping to shape the application to ensure eligibility and appropriate use of the scheme.
If you need any guidance on the matters above, please contact our banking and finance lawyers.