The Coronavirus Business Interruption Loan Scheme (CBIL) sounds great. 12 months interest paid by the government. The government will also pay any fees. Why isn’t every business applying?
Maybe it isn’t quite as simple or straightforward as it sounds.
The first point to make is that the government, via the British Business Bank, is only guaranteeing 80% of the loan. This means that the lending bank is at risk for the other 20%. Not unreasonably or unexpectedly, a bank will want some expectation of the loan being repaid. Wouldn’t you?
It’s no good just contacting a bank and saying, “I want a government loan”. Before speaking to a possible lender you should put together a sensible business case showing how you plan to get through the crisis and come out of the other end in reasonable business health and able to make a profit.
Several of our articles have stressed the importance of planning. This is an example of just how important that planning can be.
Some of our clients have already applied. We are being asked to provide information about these businesses to the bank, including accounts and projections plus, crucially, an opinion as to the future viability of the business. If we don’t know what your plan is, we will struggle to provide that information. Speaking to our client and obtaining the required information takes time. Time is precious in the current situation.
Please don’t just contact a bank without some preparation. You are reducing your chances of success. At the very least let us know you are applying so we can be prepared and highlight any obvious issues before you submit your application.
Ideally, let us help you prepare a decent proposal and plan. This could make all of the difference between getting and not getting the money.
Normal Commercial Terms
Banks are required to assess any application to determine whether the loan could be made on normal commercial terms. If the lender decides it can be, the government guarantee will not be used. However, “normal commercial terms” could mean providing guarantees and security, which are not usually required under the government guarantee scheme.
However, normal commercial terms might mean a lower interest rate and a loan over a longer period so could be better in the long term.
Types of finance available
There are around 40 lenders approved by the British Business Bank. It isn’t only bank loans (known as Term Loans) which are covered by the scheme. Lenders can also provide finance via Overdrafts, Asset Finance and Invoice Finance. Not all lenders will offer all of the facilities so shop around – or ask us to help you find a suitable lender.
Asset finance might be a good idea now if you are sure you will survive and some specialist equipment may help in the long term. Some suppliers may be happy to sell equipment at a reduced price just to get the sale. Some Asset finance companies will lend on secondhand equipment and there is a lot of decent, used, equipment being sold to raise cash.
Invoice finance may be an option if your customer is now being slow to pay. We heard of one large pub chain which essentially told its suppliers, “We aren’t paying you until this is over!” Maybe there is an Invoice Finance company which will lend money against the money owed.
If your business is new – probably started within the last two years – there is another guarantee scheme which might be more appropriate. This isn’t specifically related to the Coronavirus outbreak and has been running for some time.
Who to approach?
The British Business Bank lists around 40 providers of finance – and more are being accredited as quickly as possible. Application should be made direct to a lender
All of the major banks are already accredited plus some we’ve never heard of. A little bit of research might help find a lender operating in a specific niche and able to help you.
Accredited lenders include Barclays, Lloyds, NatWest, HSBC, Santander, TSB – and a lot more
Don’t forget loan holidays
Most lenders will allow a payment holiday. This requires an application to be made to the lender – so don’t just stop paying.
We are finding that we are being asked to provide information to support these applications which is similar to that asked for by new lenders. If we don’t know, we can’t help and have to contact you – which takes time.
What to do next
If you are thinking of applying for finance of any kind, prepare. Get the information likely to be required ready.
Even if you are not applying for finance, use the time you now have to think about your business, determine your strategy – and plan.
What can we do?
We want to support you and your business. Unless we know what you are thinking, we can’t help. Plan, plan and plan again. We will do our best to help.
Our existing clients will always receive preferential treatment. However, we do know there are businesses without an accountant or where an accountant doesn’t have the expertise required or, worse, the accountant has closed. We will do our best to help.
One of our senior members of staff spent over 20 years in a commercial finance brokerage so we do have expertise.
We can arrange a face-to-face meeting using Zoom (or something similar) if you wish.
Another informative article to have a read through – Click here