Published: 08:10, 14 August 2020
The government has, as of August 9, approved over £13.41bn of lending to over 59,000 businesses under its Coronavirus Business Interruption Loan Scheme (CBILS), and a further £34.96bn in 'bounce back' loans to over 1.1million small and medium sized businesses. Together with the Coronavirus Job Retention Scheme, government support has been a lifeline for many property businesses.
And, says John Walsham of business advisors and accountants Kreston Reeves, which has offices in Canterbury, Chatham and Sandwich, there is still time to take advantage of government support. In a special article for KentBusiness he explains what you need to do to stand the best chance of securing the funding your business needs:
CBILS allows businesses to borrow up to £5m. Applications are made to one of over 90 lenders currently offering CBILs with the loan repaid under the term agreements.
To date, just 50% of applications have been successful.
Lenders can claim up to 80% of the value of the loan from the government if the borrower defaults, but a word of caution; lenders will seek to recover as much of the debt from the borrower in the first instance.
The CBILS scheme will close on September 23, meaning businesses have just enough time to make an application.
Bounce back loans allow small businesses to borrow up to £50,000. The loan is unsecured, self-certified and can be used by the business in anyway it wishes. Loans are interest free for the first 12 months, and then with an attractive fixed interest rate of just 2.5% over the six-year term.
Around 90% of applications are successful, and with the closing date for applications in early November there is still plenty of time to secure funding.
The demand remains high for both schemes, with over £2bn lent to small businesses through Bounce Back loans and £1.2bn via CBILS in the past four weeks alone.
A recent change to the qualifying criteria for CBILS meaning those businesses which are loss making can now apply is likely to see demand remain so until they close for applications.
The poor approval rate for CBILS may appear surprising given that it has been widely publicised as a way for government to support businesses most in need. But it should be remembered that CBILS are in fact commercial borrowing that needs to be repaid. This means that normal lending criteria remain.
Lenders will want to see a detailed and thorough application that will include the company accounts for the past three years, the latest management information and cashflow forecasts.
The best applications will also include a detailed review of the business and its plans for the future. The more detail provided the easier it is for the lender to make their decision and provide the approval and funds quickly.
And it is also worth remembering that CBILS can be used to refinance existing lending to improve working capital and for invoice finance and asset finance type transactions.
Bounce back loans have provided a relatively quick cashflow to boost for SMEs with applications made online and with business owners effectively self-certifying that the loan is needed and affordable over the six-year term.
To be successful, however, businesses need to confirm that the loan is to provide economic benefit to the business which can include refinancing of existing financial commitments.
Businesses wishing to apply for a CBILS loan are advised to take independent advice in the first instance.
John Walsham is funding and business development consultant at Kreston Reeves and a former commercial banker.